Think differently about resident retention

Nick Latz: : Elaine, welcome to the show.

Elaine Simpson: Hi, how are you?

Nick Latz:: Doing great and super excited to have you on the show today, Elaine. And at Zego, you've actually been on our radar to get as a guest for this podcast for a while because of your book Close the Back Door.

Elaine Simpson: That's awesome.

Nick Latz:: And it's a book that has influenced some of our thinking here at Zego as we've researched, got a resident experience, a resident satisfaction, and we actually bought it for our whole marketing team. And so we're all kind of very familiar and big fans of the book. And so I wanted to start there. You wrote the book a couple years ago in 2019. And what inspired you to write this?

Elaine Simpson: Well we spend so much time in our industry looking at bringing new people in as far as residents go and we always have marketing plans, right? We focus on marketing, but the reality is if we can save our residents, it saves us a lot of time, money, energy, and frustration. So I wanted to write a book about resident retention, but I just didn't want to talk about the basics. We all know the basics. I wanted to use my experiences with previous resident interactions to create a book that helped you... It didn't give you the answers necessarily, but helped you realize that there were other ways to address resident retention and just get the juices flowing and get people thinking about not just sending a renewal notice 90 days in advance, but what can we do from day one? And how can I handle a situation when somebody says, "The crime is too much in the area." Different things like that. We just need to think differently about resident retention.

Nick Latz:: Yeah, couldn't agree more. And you mentioned some of your experiences in terms of working with residents and properties. Can you share a little bit for our guests in terms of kind of your background and some of those experiences?

Elaine Simpson: Sure. Well, personal level, I am one of triplets born on Christmas and my dad had a property management company and I can remember as a little girl going, "I will never go into property management. It's horrific. Who would want to manage people's lives?" They call you all times a day and they take everything out on you. And lo and behold, I ended up in property management, actually working for a competitor for my dad. And I always say, "How many of us at age 10 say, when they're asked what you want to be, when you grow up, you say property manager?" None of us ever do that, we kind of fall into it, right?

Nick Latz:: Right.

Elaine Simpson: I started out working for the competitor and worked for some national companies and just really liked the interaction and really wanted to move up in the industry. And so I became vice president of development, and all those fun things, but I lost the interaction from the residents because when you're doing development, you rarely see the residents. And so for many years, I thought about, I would love to do a training and marketing company and really work with the onsite staff to help them perfect their relationship with the residents. But I was scared, but then the great recession hit and I was laid off and decided, what the heck? Its now or never, and started my business. And then as I'm going through this, realizing that we are so tunnel vision, when it comes to resident retention, that we've got to start thinking differently about it. And that's what led me to write the book. And when I wanted to write the book, I actually reached out to a coach that actually does class on this.

And she made a very good point and she said, "People buy solutions." So you've got to come up with solutions, but they need to understand how to apply it in real life. So one of the best ways to do that is to recount experiences you had and how that impacted and created the outcome that you wanted. So that's what I did. I sat down over probably three or four months and wrote down notes on various resident retention issues that had over the 20 plus years of being on site and looked at how I could apply them to resident retention. And that's how it came about. And it was a lot of fun actually. It was fun to remember some of the successes, because you forget about that. Also, it was not so fun remembering some of the challenges, but it was fun kind of going back and going, "Oh yeah, we did that. And everybody thought it wasn't going to work and it worked." And you kind of pat yourself on the back a little bit and go, "Yeah, that was cool. That was awesome."

Nick Latz:: Yeah, that's fantastic. And I definitely agree with your point on people don't buy consulting or they don't buy processes, they buy outcomes, right? And they buy results. We talk a lot about that at Zego as well. And so, we talked a little bit about your work on retention and at Zego, we talk a lot about the resident experience and we use that term kind of resident experience and resident experience management. We view those too, resident experience, resident satisfaction, resident tension to be intrinsically linked. And when we say resident experience, we talk to our customers, we talk to the market, everybody's got a little bit of a different definition or a little bit of a different kind of spin to it. So what does that mean to you? What does resident experience mean to you?

Elaine Simpson: It means every interaction that you have with that resident and not just as a resident, but the resident experience starts from the second that they look online and see your website or see your listing on ILS or drive by your communities kind of like that initial curb appeal. But it's not just to the true curve outside the community. It's the first look at you, right? And residents want to be taken care of. So how you look online, how your listings look on an ILS, your flyers, your true curb appeal tells a potential resident, how you're going to take care of them. So that right there is key for getting the resident and getting them for the right reason. Not just because you have a lower rent or you have a special going on, but they want that experience with you. And then that continues through the application process, the move in process, move in or lease signing, whichever you want to say.

And then right through the two time that they pay their rent, put in a service request, maintenance goes in that unit, renewal time even move out and thereafter is the resident experience because you can get plenty of referrals if that resident had a great time living at your community and moves out and then afterwards feels still good about your community that's when you get referrals. So it's important that we look at that the experience doesn't start when the lease signs or the signing of the lease and it doesn't start 90 days before the renewal, which is what happens most of the time. It's the entire interaction that you have, whether or not it's in person on the internet and on the telephone, texting, letters, whatever it might be, that's the entire resident experience. And we have to look at it from that perspective.

Nick Latz:: Yeah. It's a life cycle, right? When you think about starting as a prospect and a potential renter all the way to move out, even post move out as you sometimes still communicate and correspond with your property. So I agree with that in terms of thinking it as a life cycle versus just a set of touch points.

Elaine Simpson: Right.

Nick Latz:: So you talked a little earlier about outcomes, as we think about focusing on the resident experience and focusing on resident retention as a business priority, what's your recommendation to operators? How do you measure the impact of that?

Elaine Simpson: Well, we can look back over history of a property and see what the resident turnover was. What were the percentages? And it varies from year to year. Sometimes nationally, it's 51%, 53%, 49%. But on average, you're going to lose about half your residents in a normal situation. And if you think about how much it costs to turn an apartment, they say it takes five to six times more to replace a resident than it is to keep one. And that is so very true.

We've broken it down line item to carpet cleaning, painting, replacing doorknobs, advertising the time that the leasing agent spends with three or four people before they get a commitment, all that comes into the cost of replacing a resident. And if you implement strategies to retain your residents, you are going to see a decrease in expenses and an increase in rent because you're not going to have to offer specials and things like that. So bottom line, your NOI goes up. So it may not be one specific thing that you can identify, but you can definitely see the effort because your net operating income's going to be higher than it was before or budgeted.

Nick Latz:: Yep, couldn't agree more. There is a hard cost of turning a unit, right? And we did some research on this earlier this year, we did a survey of operators, 600 property management companies across different geographies and different property types. And what that research showed is on average, it obviously differs, but on average it costs about $3,500 to turn a unit. And we've looked at some other kind of data points in the market. And it seems like the market kind of generally agrees somewhere between 3000 and $4,000 to turn a unit. And one argument I sometimes hear from folks is, "Yeah, but what if I can get a resident at a higher level of rent." Right? And so, one way that we've started talking to some of our customers about that, I think there's even one of our customers that suggested this is, but think about it this way. Right?

Nick Latz:: So let's say you're able to get a new resident at a higher level of rent. Let's just say for easy math, it's $200, right? You're able to get someone at $200 more a month. And if the rents a thousand dollars, that's a 20% increase. So that's not bad, but if it costs $3,500 to turn a unit it's still going to take you 18 months, $3,500 divided by 200, 18 months, a year and a half to break even on bringing that new resident. That's huge. It's a year and a half. And so, I don't know that the industry fully appreciates and thinks about how expensive it is to turn these units. What your thought on that?

Elaine Simpson: Yeah. No, they don't. And when I do training, so I speak and I train and we do a course on customer service, resident retention. And one of the activities that we do in this is we actually break down line item by line item, how much it costs if we're doing it for a company, how much it costs them to paint the unit, how much does it cost to replace the carpet? Repair blinds, things like that. And we actually break it down. We look at the average days that they're vacant and what incentives they offer, what their closing ratio is with leasing, right? So we get it really pretty close to what it's costing them per unit. And you can see the light bulbs go on when you do that, because they don't realize it. And one of the things that we should stress is that if we could reduce resident turnover by even one to 2%, if you took that and multiplied it by the cost of replacing a resident, that's huge, and people don't understand.

They look at the basic bottom line budget number, but they don't understand how it rolls out. The other thing that's important is that residents become very loyal the longer they stay at your community. And if they stay a year, they're probably going to leave in a year or two. They're not going to stay very long, but look at some of the properties and some of the communities where the people have stayed four or five years, they don't intend to move. They're very happy. And in fact it would be more pain in the butt to move than it would to renew. And as long as they have that relationship and that loyalty to the staff and the community they're going to stay. And you want that type of resident, because it also builds a sense of community when you've got the same people everybody knows.

Nick Latz:: Yep. That's right. And so you mentioned that industry average, retention's usually in the fifties, the low fifties, mid-fifties depends on the year and what's going on in the market, but what about operators and management companies, Elaine, that you've worked with that really focus on retention and really focus on the resident experience, do you see it impact the numbers and what can those operators get to from a retention perspective?

Elaine Simpson: Absolutely. First step is be serious and make a commitment to it and the commitment can't just be on the managers side or the regional or the owner, it has to be from the groundskeeper to the maintenance person, to the housekeeper, to the leasing person, everybody has to contribute and they have to see the value in it. And when you do that and create a plan where you have touch points with the resident on a regular basis, whether or not it's in person, a happy birthday card or holiday event or whatever it might be. But you really try to interact with that resident, not as a generic resident, but as an individual, get to know them, get to know what their hobbies are. When you see them in the hallway, ask how their puppy is doing or whatever, or bring them by for a treat, whatever it is, make that person feel like they are the only person in the world. And you will see incredible results.

We did this with a client where we created a resident retention plan and pretty much it starts with the move in then a week later, check in to see how they're doing, a week or two after that, check in and see if they need anything fixed, do they want to borrow hammer or nails, things like that. And then you stretch it out a little bit further, maybe every 30 days you call them up, see how they're doing when they pay their rent, ask them if they have anything that needs to be done in the apartment because residents are notorious for going, "Gosh, darn it, that drippy sink. I need to tell maintenance about it. And then they forget." And then six months later they're so irritated by it that they just can't wait to get out. So if we ask them not, do you have anything? But what, the key is the question, what do you have in your apartment that needs to be fixed? People think differently about it.

So we implemented all these things, right? And we sent a happy six month anniversary after they've been there for six months. I mean, just things like that. And it doesn't cost a lot of money, it doesn't take a lot of time, but it takes focus and dedication. And we were able to increase resident retention for one of our clients to almost 10% in about three months. It was just incredible. It was an incredible experience, it was probably one of our best ones, but they worked it. These people were into it, they bought into it. I mean, they were living it every day and that's resident retention.

Nick Latz:: Well, 10% is huge in only three months, I don't know how big that portfolio is, but I think when we run the numbers, it's like, "Hey, for every thousand units you have in your portfolio, five percentage points is going to drop, $200,000 in incremental NOI." And so, for a thousand unit portfolio going up 10%, that's going to be $400,000 NOI if it's 2000 units, 800,000. And so that is a measurable profitability impact.

Elaine Simpson: Yeah, this was actually just one property, a single owner, he had one property, he was really into retaining his residence. It was 130 units, I think it was. But like I said, they bought into it and they lived it every day. And I think that's key to resident retention.

Nick Latz:: Fantastic. Fantastic. And so, kind of getting a little bit more tactical. When you think about, and you hit on some of these in the last answer, but when you think about the different resident touch points, right? The different ways residents interact with the property and the property staff, what do you think are the most important on retention and on resident set?

Elaine Simpson: Well, keeping in mind that people rent because they want to be taken care of and they don't want to take care of their own place. Right? They don't want to remove snow if you're in the Midwest, they don't want to worry about exterior maintenance, things like that. So maintenance, it's probably the number one thing that people feel is important when it comes to renewal and studies show that. So obviously maintenance, but it's not just maintenance. So when you say maintenance, we think of the guys or women going in the apartment and fixing things. Right? But it also has to do with the office and communicating correctly to the maintenance person. So for example, if a resident calls up and says that they have a drippy faucet, we get that all the time, right? If the person taking the phone call doesn't specifically ask, where is the faucet? Which bathroom, kitchen? Whatever it might be, where is it leaking?

Elaine Simpson: Is it leaking continuously? Or, is it leaking only when it's on? And if so, is it hot or cold water? There's specific questions that they can ask to really narrow it down so that when maintenance goes in there, they know exactly what they need to do so they do it correctly the first time and take care of it, no problem. This avoids the resident coming home and going, "I put in a service request, it's still not done. I thought it was going to be done today." They call the office. They're irritated. It's been a long day. And they take out frustration on the office person. Well, the problem is the office person didn't specify which faucet. So when maintenance walked in, the first room they come to is the kitchen and the faucet's dripping. So they think that's the problem. So they fix it. But the bathroom that's right in the master bedroom, that when she's trying to sleep, she hears the dripping is what really irritated her. It's still going.

So it's maintenance, but it's communication, everything that leads up to it. And then follow up on that. If we call the resident, say, "Mrs. Smith, are you happy with the work that was done in your apartment today? Is there anything else we can do?" If they say, "No, I'm not happy." Then that gives us an opportunity to fix it. If they have other things to do or needs to be done, we can go in there and fix that too. It's all about communication and really trying to be proactive and making their living situation at your community the best it can be.

Nick Latz:: Yeah. And what I'm hearing from you, Elaine, is it sounds like the details matter. I've heard you say just kind of small wording choices, right? Like what needs to be done in your apartment? Which faucet needs to be looked at? Right? And the follow up, right? And it's not just as easy as, "Hey, maintenance matters." It's kind of the advice and the experience of exactly how you kind of do these resident touchpoints and do these communications that can make the difference between if you get a big impact or not, right?

Elaine Simpson: Absolutely. And educating the staff. I mean, at many communities across the country, we have numerous cultures living in them. We have people that don't speak English very well. There's all sorts of different situations going on. So when someone calls up and says, "The eye on my stove isn't working." If you write that down and don't understand what the eye is, you're not going to fix it. And when I do the class and I say, we talk about different wording for different things. And I say, "What's an eye on the stove." You'd be amazed how many people don't know what that is, but people of certain generations or cultures often would refer to the burner as the eye on the stove.

So if we know that and we write down burner and parentheses, not only are we giving the maintenance person correct information, but we're also probably educating the maintenance person. And vice versa, if the person puts eye on the stove and doesn't ask what it is and goes to maintenance and says, "I'm not sure what this is, what is it?" And she can be, or he can be educated to learn that it is a burner, that's how we communicate better. Communicate the way our residents want to communicate, communicate the way our employees and coworkers want to communicate. That makes things a lot better.

Nick Latz:: Yep. So one of the things we loved about your book Elaine, Close the Back Door is this is packed with practical recommendations for operators around retention. What are three recommendations that you might pull out for our listeners that they can put in place in their communities over the next three months?

Elaine Simpson: Absolutely. I would suggest implementing a resident retention plan and I have on my website on my resource page a sample of one. So you can download that and make your own, and based on what your availability and things like that is, and staffing issues. It's very low cost. It's more about touching and that sounds wrong, but you know what I mean, the resident and making sure that they're happy. Again, ask what do they need? What do they need fixed? Not do you because we think differently when you answer that question. And then lastly, don't wait until the last 90 days of the lease to start working the renewal. It should be worked the latest at the day, they move in, if not before, and really start talking when you renew, not if you renew. So using the word when, as opposed to if.

Nick Latz:: Those are great tips. And so we've talked about Close the Back Door, and I understand you've got a new book, which has recently come out earlier this year. Is that right?

Elaine Simpson: Yes, I did. It is The Indispensable Handbook for Property Managers.

Nick Latz:: Super excited to pick that one up. So final question here for you, Elaine, we focused on the resident experience in this podcast, who are two other guests that we should invite onto this podcast?

Elaine Simpson: Sure. Mark Cukro is a incredible, incredible trainer and speaker. He started out with maintenance, but does a lot on leadership and again, maintenance and maintenance interaction. And then Donna Lee, she's been in the industry for many, many years, and she is an incredible woman. She's written some great books and she'd be a fun, fun person for you to have.

Nick Latz:: Fantastic. Thanks for those recommendations. Elaine, this has been a great discussion. You mentioned a couple artifacts on your website, like the sample resident or retention plan. We'll make sure that we link to those within our show notes on our episode page. So the listeners can access those and dig in more. And thank you so much for taking the time to speak with us today.

Elaine Simpson: Well, thank you. It was very nice.