Tenant Turnover - What is it ?
Tenant turnover refers to the proportion of tenants that left versus those that stayed at a given property. It is similarly used to refer to the gap of time between the expiry of a lease and the arrival of a new tenant. The goal of successful property managers and owners is, unsurprisingly, to reduce tenant turnover as much as possible to minimize the loss of rental income due to the vacancy of the property.
Tenant turnover can kill profitability, especially due to the process of getting a property ready for a new tenant after a lease expires and the previous tenant moves out.
Property managers and landlords must make turnover as efficient as possible to minimize the vacant property time (time during which there will be zero rental income yet stable maintenance costs). Fortunately, though there are many external factors that contribute to tenant turnover, it's not completely out of your hands.
What are some of the costs associated with tenant turnover?
Though there are many costs associated with tenant turnover, here are some of the main ones:
- Administrative costs: the time it takes to market a property, process paperwork, repair and clean etc.
- Leasing costs: e.g. the costs associated with showing and renting a property, which includes all those that come with co-ordinating these actions.
- Processing costs: things like credit and background checks aren’t cheap!
- Marketing costs: some costs for rental ads can be incurred, depending on the type of property and marketing objectives.
- Cost of lost income: the longer your property is vacant, the longer you go without receiving income for a given property. This is a cost!
How to reduce tenant turnover
As we mentioned, its virtually impossible to eliminate tenant turnover, but there are certainly things you can do to reduce it. This includes:
- Maintaining positive tenant relationships: keep up with requests, be open and communicative, and do your best to make your tenants happy.
- Be fair with rent: make sure your rental is priced at a fair market value and that you’re keeping up on maintenance.
- Vet your tenants: checking credit reports and tenant backgrounds can help you source good tenants that are likely to stick around for longer (and make your life easier!). There are tons of online resources for finding better tenants and improving your skills as a landlord.
Ultimately, finding a good tenant is one of the best ways to reduce tenant turnover and improve profitability. So, run comprehensive screening, communicate, and get to know your prospective tenants.
