Most rental residents treat their dwellings like renters, not home buyers. That’s because rental residents “think” like they are renters, in almost all cases. However, I’ve found it is to the landlord’s advantage if tenants think like “future home buyers.”
Residents who think like home buyers act in the following manner:
Take better care of property than average tenants.
- Pay rent on time and fulfill other obligations.
- Handle minor repairs and needed maintenance.
- Add upgrades/improvements to the property.
Therefore, from the very first month a rental resident moves in, one of you major management objectives is to change their mindset from renter to future home buyer. In fact, your opening letter of introduction, or cover letter, to announce your rental policies starts off: “Welcome Future Home Buyer”.
The process to change a resident’s mindset from renter to future home buyer is not instantaneous, but can be gradual yet continual and very effective. Here’s how I suggest you start the transformation.
WELCOME “FUTURE HOME BUYER”
In the first month, welcome the resident as a “future home buyer” and use that term in both oral and written communication.
Give on-time thank you vouchers.
At the start of the second month, after the resident pays the rent on time, send your resident an On-Time Thank You Voucher – valued at either $25 or $50 good toward the purchase of the home they are living in (or toward any one of your homes if that is an option you would consider).
The first time your residents receive this voucher, they will probably not call you up in immediate urgency to buy your home. But this strategy will start their minds thinking a little about the possibility of buying.
Oh, I almost forgot to mention, one small but significant point about how the on-time thank you vouchers system works. If a resident is ever late, any vouchers received up to that point are considered null and void. This point is spelled out on each voucher as a reminder to residents.
This is significant because when residents first start receiving the vouchers, it effects them. Even though they may not be sure if they will ever buy something; most people don’t want to lose out on something of high perceived value that they can receive. Residents will keep paying you on time so they can keep getting the $25 or $50 vouchers.
The vouchers begin to add up to significant amounts after several months, up to $600 in a year. Residents don’t want to simply throw that much money away or lose it. Some owners offer a one-time only, or once a year only, late payment without complete loss of accrued voucher total. With a late payment, owners deduct a penalty of 25% or 50% off accrued total instead of penalizing the full amount. Whatever method you utilize, the penalty should be significant to be effective.
Your residents will do everything within their power to be able to keep paying the rent on time each month, to keep from losing the possibility of using the vouchers. Don’t be surprised if the residents begin paying a week to ten days early to insure they don’t come close to missing out.
HOLD HOME-BUYING DISCUSSIONS
By the middle of their first rental year, you will want to ask the resident if you can have a home-buying discussion with them.
Hold home-buying discussions twice a year. They are an important part of the transformation process. During home-buying discussions, you share with your resident the buying possibilities, outright purchase, lease option, land contract, etc. As the owner, you should also mention your criteria for choosing whom you would sell the home to under favorable terms. Home buyer criteria should include someone with good payment history and good maintenance and upkeep history.
As the transformation from renter to future home buyer continues because of your home-buying discussions, your resident will take excellent care of your property.
It’s important that you understand that the objective of changing the resident’s mindset is to get residents to “start” to think of themselves as future home buyers, but it is not necessary that they actually buy a home. In fact, please note that you do not allow residents to cash in on their vouchers until an actual closing to buy the house takes place. Even though you are starting to change the resident’s mindset, in most cases you will not see the final transformation from renter to future home buyer to actual home buyer.
However, just getting residents to think differently of themselves, as future home buyers, during their stay in your rental, will cause them to perform differently. Even if they end up not buying one of your homes, and rents or buys elsewhere, the steps I’ve suggested you follow to start the transformation from renter to buyer, will greatly benefit you the rental owner. You will get rents on time, residents will take care of all minor repairs and maintenance headaches for you, because you are not dealing with a renter, you are working with a future home buyer, whose performance is determining whether he or she will be able to buy.
Stay in control and make the most of your assets.