How to Limit Rental Delinquency and Increase Rentals through Rewards Programs

Landlords and property managers are always looking for ways to limit rental delinquency and increase rentals. One strategy that has proven to be successful is the implementation of rewards programs.

Rewards programs offer incentives to tenants. The benefits of rewards programs are clear: They can help landlords reduce delinquencies, tighten up credit approvals, improve resident satisfaction, and even drive more referrals.

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How To Limit Rental Delinquency And Increase Rentals Through Rewards Programs

Walk us through the value proposition. I know a big part of it is helping with renewals and reducing delinquency. Can you define the two terms for us and give a property management one-on-one on the importance of these two variables?

When you look at what a property does, is it going to put it very plainly heads and beds, the old hospitality term, and they need to collect the rent and maintenance to the building? All of those things are reliant on the resident making a decision to do that. The resident has to decide to go move in. They do have to decide to pay the rent. They got to either set it up for automatic payments or deposit that money.

When the resident decides to be able to do those things, it makes it a lot easier to be a property manager. Delinquency is when a resident has chosen not to pay or cannot pay. That's reflected in a percentage of overall out rent. You talk about it as what the delinquency rates are. It might be 3% or 4%. The national average right now is a little over 4%. During the pandemic, it was higher.

If you start going over those amounts, it means you have collected the money. As with any business, if you don't collect the money, you don't do so well. If you can influence the decision of the renter to be able to make a payment on time, your business is better. That's what we do really well. Renewals are at the end of the lease. You're coming up 90 days. You should get a notice that says it's time to be able to renew and you have to go down to the leasing office and you sign something.

It's actually a relatively cumbersome process. It's sometimes going to be very legal. We make that a rewarding process by giving Cash Back to incentivize the residents to renew. When they renew, they get another 12, 18, or 24-month lease, depending on what the building offers. They can stay longer. There's some friction in that renewal time. A lot of times, the price goes up. Think about it as signing up for Netflix and at the end of the year, your Netflix just went up. You may decide, “Do I need this Netflix again?” With rent, you still need somewhere to live, but you might start browsing somewhere else and be like, “How am I going to find something cheaper?”

How a tenant feels about the property is also a factor. You gave the example of Netflix. Yes, there is Netflix and they might be annoyed by Netflix of the most people aren't. There might be other platforms that have other titles, but generally speaking, Netflix is the leader. There aren't many alternatives. When it comes to rent, a lot of things can impact the resident experience. Sometimes it might just be that they don't feel valued. They just feel like they're another number.

Delivering a personalized experience and touch is a real challenge for property managers. It's not just about how much it costs and it's not even about what the community is like. Do I feel valued? A lot of people will move out in spite because they feel like they're being cheated by the property manager when they move out because of the expenses or they just don't feel valued. Could you talk to us about how to create an engaging one-to-one experience?

Once you’re offering a gift or cash back, people suddenly put in the right email address.

Thinking about everything that we're doing, how being a consumer is right now, you're very empowered in most situations. People give you a lot of tools to be able to help you make decisions. I got a search on google. We'll be able to look at a lot of alternatives. There are a lot of services that are put on to buying that help you in that process. You can turn to social media and be able to ask questions and whatnot. Renting hasn't really moved into that empowered state. It is very much, “Here's the box that you're getting,” and then maybe don't put amenities on it and the thing as well, but it's left to you and you don't feel like there's anybody there to assist you or empower you in that decision.

At the same time, if you've had this experience where you spent most of that 25% to 35% of your take-home income that entire year on this product that you don't feel valued in, and then across the street, you see a sign that says, “One month free.” That's a pretty good thing to be able to be like, “Maybe I should move over there. It's cheaper.” It's forcing you into these transactional decisions. It's not forcing you into something where you really feel valued.

What we try to be able to do is we try to be able to get before that moment to say, “We really value you.” It’s the power of thank you a lot of the time. “Thank you for being here. We want to be able to offer you something for being here.” That just as a nudge. Sometimes we just need a little nudge or a little thank you to be able to say, “Actually, I like this brand, this product, this company, this neighborhood, this rental, and I'm going to be able to stay.” If nobody ever does that for you and you just get this legalese pushed under your door that says, “Your notice is coming up,” you probably don't feel as valued as you are in these other decisions that you're making to by-product everywhere else.

How have you guys reached consumers through property managers? I know you can maybe talk a bit about the profiling you've done and giving people gifts when they move in.

It's really interesting. Property managers get in their property management software, email and phone number. Maybe they should have the amount of the rent, but they don't have too much more about who that human is or this person who's moving in. They just have this very basic information. One of the first things is we just ask, and it's amazing. As with any conversation, if you learn about somebody, you are able to have a further conversation.

If we learn that they have a pet, people love talking about their pets and we give them a Chewy gift card for their pet. It's something I learned working with Chewy. If you can bond with somebody on their pets, you're in. You talk to me about our cat, you're in. There's always somebody who has a dog. We learn a little bit about that rancher when they first move in and we offer a little thank you welcome gift. If you've ever been in a hotel that just leaves you something really nice, you remember it. There have been really incredible studies on this and the hospitality industry. If somebody remembers your name, how much more do you value that hotel. It was little things like that.

The next knockdown thing that happens is that I'm not sure if you've done this, but I certainly have. When you go into Macy's or you're online and somebody asks for the email address, you're like, “Here's the spam email address. I never want to hear it from you, but I got to put this in.” Renters do that as well. It means that you get this like a bad database. People put in the wrong email address.

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Once you're offering a gift or Cash Back, people suddenly put in the right email address that they actually read. We've noticed this increase in what we call contactability. Usually, about 70% contactability means that the property can only reach maybe 70% of their residents, and we're able to get that up over the 90% mark. People should go, “I want to hear from you now, and I'm not giving you my spam email address that I never check anymore.” I use two of them for all the things that ask me online. The one that I really give to a friend is the right one and that's what we hope that people are giving to us.

It just seems so obvious to me coming from the tech industry. When I entered real estate, I was horrified at how rigid and formulaic things are. For example, you take a rent roll, and firstly, it's scary. You could be looking at a property and you're liberally getting this rent roll with contact details of people. You're like, “They're passing this along to twenty different firms.” This is something that needs to be on the blockchain or something that needs to be very carefully hammered.

Also, people ignore a lot of things on there and you get a lot of variability between roles. Sometimes you'll have occupational data, sometimes you'll have a lot of things missing, but ultimately it's just a formula. People look at it. What's the average rent? Can we increase the average rent if we buy this place? It's refreshing to look at that tenant base, not as levers to increase your rent, but as humans, it’s that live and call this place home and connect with them one-on-one.

It's all the language we use. It’s like doors. In the multifamily, how many doors are in that place? It's like a human lives behind that door. I always joke. You say to anybody else, “We do work in multifamily and single-family.” Can you translate it for your parents? I'll say, “It's a building and a house.” A lot of times, the language is so abstracted from the human reality. That's important from an accounting level. I get it. You have to be able to make these payments.

At the end of the day, this is what tech has done well. Certainly, if you think about Amazon, one of the largest businesses in the world, it has been able to figure out how to personalize and still get to know the individual of what they buy and their habits. The home was probably one of the most important things. Get some of the basics right. First, do we have the right email address? Second, can we learn a little something about them that's important? Remembering a pet's birthday can be a big one. Just send something on that pet’s birthday.

Not even the tenant's birthday.

We do pet's birthday. The reason why we do pet’s birthday rather than tenant’s birthday is that we found that with the tenant's birthday, it can feel a little creepy, but pets, people are totally on board. I always joke about this. The life insurance person who sends me the happy birthday card always feels a little weird. It’s like, “Keep on going. Not quite on the actuarial table yet.” I like the pet side of it or something else that may matter to them.

We do the Chewy gift card. We do a DoorDash gift card. We've even done Upwork gift cards to be able to help people who are working from home and you just learn something cool, like, “You're working from home. Now I know something about you. You don't travel to work.” It's a place where you'll just start that next conversation. They're getting Cash Back each month, and then we try to figure out what they're saving for. Are they saving for a home or doing something for the next car? Are they saving just for a rainy day? Being able to learn about that is probably the biggest thing because now I know what their aspirations are and I can help them get there.

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About Zain Jaffer:

Zain Jaffer is an accomplished executive, investor, and entrepreneur. He started his first company at the age of 14 and later moved to the US as an immigrant to found Vungle, after securing $25M from tech giants including Google & AOL in 2011. Vungle recently sold for $780m.

His achievements have garnered international recognition and acclaim; he is the recipient of prestigious awards such as "Forbes 30 Under 30", "Inc. Magazine's 35 Under 35," and the "SF Business Times Tech & Innovation Award." He is regularly featured in major business & tech publications such as The Wall Street Journal, VentureBeat, and TechCrunch.