How to Avoid High Tenant Turnover Costs to Protect Your Cash Flow
Incredible friendships are painful to lose; the same goes for losing those one-of-a-kind tenants. The ones you let you know they’ve just fixed the kitchen pipe on their own account, ask before they plow the back lawn—that kind.
So, when a long-time renter ups and leaves without so much as a goodbye and the last payment, your heart might just about break. Not to mention your bank account.
You’ve put in a lot to take care of your renters. You took care of their emergency requests and maintained the house for their enjoyment. And until you land another perfect renter to take their place, your property is collecting dust and raising expenses.
In this article, we’ll teach you how to avoid high turnover costs and avoid losing renters in the first place.
Well, there’s a way to avoid high turnover costs. And we’ll teach you how.
What Makes Rental Turnover Expensive?
Turnovers lead to lost revenue due to lost rental income, mortgage payments, and new advertising costs. Here’s a breakdown of how much it typically costs to have your rental property sitting empty—and this is only for one month:
- Mortgage Payments: $900
- Property Taxes: $250
- Property insurance $100
- Cleaning and Maintenance: $300
- Advertising Costs: $50
- Tenant Screening: $40
- Property Manager Fees: $180
- Other Bills: $100
The total cost is nearly $2,000 per month. And it doesn’t even include the loss in rental income.
Of course, your situation may be different—maybe you don’t have to pay property manager fees. But no matter where you experience the most significant losses, your investments still suffer a dent.
And the longer you weather the damage, the worse it becomes.
6 Reasons Why Tenants Leave Rentals
The main goal is to keep tenants happy in your unit, which means you must understand why they’d consider leaving in the first place. Every person has different reasons, but these are the typical reasons that a renter would give (and what you can do about it):
1. Expensive Rent
Your tenant may leave if they find a better deal elsewhere. Stay on top of market trends by conducting regular market comps to ensure that your rental stays without a fair market rate.
We’ve also written a guide on how you can price your rental fairly.
2. Problematic Neighbors
Disrespectful or noisy neighbors can quickly go from a minor annoyance to a major deciding factor for leaving. As the landlord, your tenants will appreciate seeing you trying to lessen complaints and tension within the surrounding environment.
And, if your tenant is causing a ruckus, check out our problematic tenant series!
3. Too Slow Maintenance Needs
As they always say in the industry, “Maintenance is never fast enough for tenants or cheap enough for landlords.” Renters may even demand that their maintenance needs are addressed the minute they call for help, yet, arranging for fixes isn’t as simple as it sounds.
Still, you’ll improve tenant relationships (and save yourself from potential massive costs down the line) by responding to them, acknowledging the urgency, and going the extra mile to build rapport. The last thing you should have are unresolved maintenance needs, leading to frustrating tenants and property damages due to neglect—unnecessarily increasing your turnover costs.
4. Change of Circumstances
Tenants might get a new job offer in a different city, a promotion that allows them to rent a bigger house, kids that need to transfer schools, or a far-away relative might need their care.
You can’t control your renter’s personal circumstances, and just as they come as a surprise to you, they can be unsettling to them too. The best you can do is respect your tenant’s life changes and support open communication.
5. Property Isn’t Right Anymore
The house might eventually be too big or small for the tenants. Maybe they’ve adopted a dog, and your rental doesn’t allow pets. Or, maybe they simply decide to live a different lifestyle!
Whatever the reason, tenants may “outgrow” a property and realize that it makes more sense to rent one that better supports their new style.
You can try to meet your tenant’s changing needs and keep them in your business by advertising other properties to accommodate a range of lifestyles.
6. They’re Ready to Own
Depending on the area, tenants might realize that it’s cheaper to purchase than rent a home. Owning a home is still the American Dream, after all, and nobody would pass up the opportunity if it were to present itself.
Running over a tenant’s dream to own isn’t right, and you probably won’t stand a chance in halting their next step. Wish them well and look forward to your new renters.
Tip: If you’re a first-time landlord looking to purchase a property, make sure that the neighborhood you choose is in an area where it’s cheaper to rent than purchase. It’ll be easier to keep renters!
5 Ways to Lessen Turnover Costs
Showing your renters that you appreciate them by keeping up with market trends and understanding your neighborhood’s community and your renters’ needs can help to avoid turnover. Here are five ways to put it into practice:
1. Screen Tenants Thoroughly
Aside from ensuring that your tenants can keep up with payments and maintenance, do your best to secure tenants that’ll likely stay in your rental for a long time.
You can ask about their future plans (even if those will eventually change), how long they stayed in their past rental and the reason why they want to move into the area.
2. Simplify Rent Collection
You don’t want to chase tenants for rent—it’s a hassle to you and an annoyance to them.
It’s best to automate rent collection, so the tenants don’t have to think about it, making them feel like it’s “simple” to stay in your place. Alternatively, hire an excellent property management company to take over rent collection and tenant management.
3. Rent Increase Flexibility
Instead of going for the maximum increase for every renewal, consider some flexibility for great tenants. We do NOT recommend any increase but realize that if you factor in the cost of a turnover, it often makes business sense to agree to a moderate rent increase. You can also consider rental concessions like offering reduced rates (if the market is dropping), free months, or bonus amenities to encourage tenants to stay. Concessions aren’t a replacement for doing the basics of property management well, of course, but they can make your rental more appealing in a competitive market.
4. Keep Your Rental Updated
Get to know the local tenant pool and stay updated with the amenities and features they want. Not only will you make the property more attractive to potential renters, but you’ll also keep current tenants longer—they won’t move if they see no reason to change homes.
From our experience, these are the amenities that tenants usually like:
- Online/mobile options for payments, reporting maintenance issues, etc.
- Personal washer & dryer
- NOT carpeting, they now prefer hard surfaces
- Over-range microwaves & dishwashers
- Modern light fixtures (LED)
- Avoid dark colors for cabinets and paint
- Open floor plans
- High-speed internet connections
- High-security systems (e.g., gated access)
- Outside entertainment areas (e.g., a patio)
It should go without saying that you should also maintain the property well. And this goes beyond handling emergency maintenance requests—don’t forget to do routine checks and annual inspections as well. Put yourself in the tenants’ shoes and make the house an excellent home to stay in long-term.
5. Work with a Turnover Expert Team
Finally, having professionals handle turnovers for you will guarantee speed and expertise. You won’t waste time marketing the rental, screening applicants, and cleaning the house with trial-and-error strategies—experts can ensure that everything is as efficient and cost-effective as possible.
Low Turnover Costs, High Investment Returns
While there are several things that you can do to minimize turnovers, even the best tenants will eventually move on. With vacant properties potentially costing you thousands of dollars each month, it’s crucial to have good strategies and professional help at your disposal to quickly secure new tenants.
Get in touch with our team today! With our help, you won’t even have to think about lessening turnover costs, because we’ll lessen the chances of it happening in the first place.