How can real estate investors avoid the occupancy fallacy trap and minimize tenant turnover?

Dana on June 6, 2022

How can real estate investors avoid the occupancy fallacy trap and minimize tenant turnover?


With the rising opportunities for remote and hybrid work, renters have more flexibility and opportunities to relocate than ever before.

The multifamily industry is nearing to record-breaking occupancy rates, but renter migration is a sleeping giant that should not be taken for granted.

In this respect, tenant retention will be the biggest task for multifamily owners in the following months and years.

How can multifamily investors avoid the occupancy fallacy trap?

Today, we have one of the strongest labor markets we have ever seen, and as working from home become the new normal for large number of companies, workers have increasingly more and more opportunities to work from anywhere they like, making their relocation easier than ever before.

 In this respect, multifamily owners must be proactive and not fall into the occupancy fallacy trap, which is the idea that high occupancy rates in the near term will alleviate vacancy concerns longer term. Tenant migration is the sleeping giant that multifamily owners should not underestimate.

What this means for multifamily owners, is that the bare minimum is no longer the standard in keeping their tenants, but the new reality is that they must adjust their properties to the shifting higher standards of living those tenants expect.

Considering that it can cost up to $5000 to replace a new tenant depending on the vacancy length and tenant value, it will be much more cost effective for multifamily owners to undertake the appropriate steps today to keep their current tenants happy, attract potential new tenants with higher purchasing power and increase their negotiation leverage that will enable them to maximize their rent growth and property value appreciation in the future.

How should multifamily owners protect themselves?

Multifamily owners should focus on keeping their current tenants happy by improving their interior, exterior, amenities and operations designed to deliver outstanding level of service and client satisfaction. Kitchen and bathroom remodeling, in-room washers and dryers and amenity upgrades relevant to the property location and target group preferences could usually provide the biggest return on investment for real estate investors.

With the shifting customer preferences, tenants today have much higher expectations for quality outdoor amenities, and the most desired ones on their wish list include fitness center /gym, basketball and tennis courts, rooftop decks, recreation rooms, designated pool areas for adults and children, grill area, free high-speed internet, children playground, automated alerts for package delivery, bicycle parking, designated parking spots, and 24-hour security and surveillance.

Additional steps that would show special care towards current tenants would include sending congratulatory birthday and special occasion notes and small gifts to current tenants, as well as running tenant surveys to measure their client satisfaction, and offer virtual tours and online applications for potential new residents.

In this respect, the best strategy that investors can use to maximize their ROI and future cash flow is to hire a general contractor with a proven track record to complete the work for them within their budget and on time to avoid delays, overspending or a loss-to-lease scenario.

In light of these trends, multifamily investors need to prioritize tenant retention. With the right strategies, multifamily owners can avoid being caught in the occupancy fallacy trap when renters begin their migration to new locations and better professional opportunities.


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About Adivo Construction

We are a national general contractor with over 50 years of combined construction expertise specializing in the value-add improvements of apartment communities.

Our mission is to assist our clients in finding the right balance between capital expenditure and appreciation potential by designing and executing customized renovation programs that are focused on increasing cash flow return and overall return on investment.

We have completed over 100 repositioning projects for publicly traded and privately held domestic and foreign companies in states such as Florida, Texas, Kentucky, Oklahoma, Georgia, South Carolina, Utah, North Carolina, Tennessee, Indiana, Michigan, Missouri, Arkansas, Ohio, Arizona, Nebraska, and Kansas.

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