The Investor’s Guide to Tenant Turnover
TL;DR - Tenant turnover can be costly, so you’ll want to minimize it as much as possible. To do this, keep your tenants happy, your property maintained, and upgrade when necessary.
As the industry likes to say, cash flow is king…
Which couldn’t be more accurate.
When you own a rental property, you get a solid income through your monthly rent.
And who pays that monthly rent?
Your tenants.
In an ideal world, your tenants would stay in your property forever…
Which would make your rental 99% passive.
But in actuality, tenants eventually leave and you’re left footing the bill.
So what do you do when you have tenant turnover? And how do you prevent it?
The Investor’s Guide to Tenant Turnover
What Is Tenant Turnover?
In the real estate world, tenant turnover is when current tenants move out of a property and the property is made ready for new tenants.
Normally this happens because the lease ends and your tenants have either found a new place or are moving to a new area.
While it’s normal for tenants to come and go, you want to minimize tenant turnover as much as possible as a landlord or property owner.
Why Is It Important?
Ideally, you want to keep tenant turnover low because it can be quite costly — think thousands of dollars.
It’ll eat up your cash flow in the blink of an eye.
Every time a tenant leaves, you have to go through the process of finding a new one.
This affects not only your money but your time as well — especially if you don’t have a property manager.
You may have to do repairs or renovations to make your property more appealing to potential tenants.
And if you’re not careful, you could end up with a tenant who doesn’t pay rent or causes damage to your property.
We’re talking worst-case scenarios here, but it’s always better to be cautious rather than optimistic with your investments.
At Undoor, we budget turnover reserves when running our numbers to prepare for tenants leaving as best we can.
So how do you minimize tenant turnover?
8 Ways To Prevent Tenant Turnover
Now that you know what tenant turnover is and why it’s important to prevent it, let’s take a look at some creative ways you can do so.
Know Your Local Market
You need to be aware of what’s happening in each of the markets you’re invested in…
Because not doing your due diligence could cost you big time.
If you don’t know the fair market rent for your property, you’ll either undercharge or overcharge on rent.
Undercharging — while great for getting tenants in the short-term — crushes your profit in the long term.
Overcharging will make getting tenants that much harder… if you can get them at all.
Raise Rent Consistently and Fairly
It’s good to raise your rent a little bit each year.
Not too much where tenants can’t afford it anymore — just enough to where you’re getting a fair market rent and adjusting for inflation.
If you wait too long to raise your rent, you’ll have to hike it way up and your tenants will feel shocked and betrayed.
Consistently increasing rent yearly helps your tenants prepare for it and get used to it.
Maintain Your Properties
Keeping your properties in shape can do wonders for retaining tenants.
If your rentals are always in good condition, tenants will be more likely to stay put.
Plus, it’ll be easier to find new tenants when you do have turnover.
Understand What Amenities Your Tenants Want
Tenant happiness 101 is understanding what amenities they want.
Do they want a washer and dryer in their unit?
Do they want a dishwasher?
Do they prefer hardwood floors or carpeting?
Understanding your tenant's preferences allows you to make the necessary changes to your units. In turn, this keeps tenants happy and prevents them from leaving.
Screen Your Tenants Well
Landlord happiness 101 is knowing you have good tenants renting your property.
You need to make sure your tenants are responsible and will take care of your property.
And you definitely want to know that they’ll pay their rent on time each month.
Being a happy landlord will make it that much easier to take care of your tenants and make them happy.
A good way to screen tenants is by doing a background check and looking at their rental history.
Get To Know Your Tenants
Now, you definitely don’t need to be BFFs with your tenants!
But it helps to build a rapport and know them as individuals.
If you know your tenant and they know you, they’ll be more likely to take care of your property and stay for a longer period of time.
Plus, you can show them you appreciate them by remembering stuff about them and sending them gifts every once in a while.
Treat Good Tenants With Respect
If your current tenants are awesome to work with, show them they matter.
When they contact you about something wrong with your rental or a fix that needs to be done, get back to them ASAP.
Go the extra mile and help them out same-day if at all possible.
And always give them a notice and call before entering the property.
You don’t have to call before entering, but it’ll be much appreciated.
Showing respect will do wonders to make your tenants feel valued — which makes them respect you in turn and more likely to stay.
Get Rid of Bad Renters
If you have bad tenants, get rid of them as soon as possible.
Not only will they give you headaches and make your regret investing…
But they could cost you tons of money down the line.
A lack of respect might lead them to dirty — or much worse — damage your rental.
You don’t want poor current tenants to ruin your property for future tenants.
What To Expect If Turnover Happens
On average, vacancies caused by tenant turnover cost $1,750 per month…
Yikes.
And how long it takes you to fill a vacancy really depends on how updated your property is, where it’s located, how fair your rent price is, and what time of the year it is.
So the best thing you can do is to prepare for if and when it happens.
The good news is that your lease should have a clause that requires tenants to give you a notice if they aren’t renewing their lease.
The time frame is dependent on your lease agreement.
A rule of thumb is to send 30-day and 60-day notices before your tenants’ lease expires — that way you’ll know whether you’ll have turnover or not ASAP.
If you do have tenant turnover, make sure to nail these points:
Do a deep cleaning of your property.
Catch up on needed maintenance.
Touch up any paint that needs it.
Install wanted amenities in your rental.
That way, potential tenants will desire your property as much as possible.
Otherwise, when tenants move out, it’s pretty simple.
You’ll do an inspection of the property. Figure out if any of the security deposit is needed for repairs. Get the keys from your tenants.
And that’s it!
After, you’ll have time to work on upgrades. Hopefully your next tenants will stay longer.
Keep your tenants happy, your properties in good shape, and…
Happy Hunting!
How We Can Help You
Does investing in real estate sound intriguing to you? Would you like to learn more? We’d love to be of value!
At Undoor, we pride ourselves on teaching new and experienced investors how to maximize their gains with minimal stress. Our goal is to help you fall in love with real estate and real estate investing!
Do you want to get key insights and advice that’ll help you get ahead of the game? Don’t hesitate to contact us for any and all real estate wants or needs.
