How much does apartment turnover actually cost, and what landlords can do to reduce vacancy periods and mitigate the subsequent costs?
Apartment turnover comes with a range of costs and additional work. It means creating a listing, arranging phone calls, replying to emails, managing viewings, collecting applicants and screening tenants.
Even without the loss of your expected rental income, these costs can quickly become a significant financial burden. A vacancy that drags on for just one month can cost upwards of $2,000 and the longer this drags on the more it costs.
With more units, these losses stack up even further and of course, your occupied properties still need regular property management with day-to-day admin tasks demanding your time, attention, and finances. This can shake your confidence and the confidence of any invested parties and could lead to your rental business quickly sliding into the red.
In this article, we explore how much apartment turnover actually costs and what landlords can do to reduce vacancy periods and mitigate the subsequent costs.
While most investors are aware that apartment turnover leads to lost rent revenue, many don’t think about the cash flow issues this causes. From, mortgage payments to advertising costs, we’ve taken a closer look at how much it actually costs to hold a vacant property.
Total opportunity loss for 1 month – $2,068
The costs outlined above are just the fees and expenses a property will accrue during its vacancy. You also have to think about the lost rent revenue. And of course the longer this vacancy drags on the more expensive it becomes.
With the cost of apartment turnover so high, it makes sense to try and avoid it where possible. In order to do this, you need to know why tenants turnover.
Even so, there are some reasons you’ll have no control over. In these cases, you’ll want to make sure that you’ve got systems in place to find and secure a new tenant to move in as soon as the old one moves out.
A few of the main reasons for tenant turnover include:
If your tenant thinks they can get a better deal elsewhere they will likely jump at the opportunity. Doing regular market comps will help you keep your rental at a fair market rate.
Loud or disrespectful neighbours can quickly go from minor irritation to a major problem. As the landlord make sure you deal with any complaints quickly.
Pay attention to property maintenance (big and small!). When it comes to rentals, taking care of any needed repairs without delay shows tenants that they’re important. If it’s an emergency, send a maintenance person to the property ASAP.
And those small issues? Not only will fixing them make your tenants happy, but it may uncover bigger problems that need an immediate remedy and could save you larger costs down the line.
This could be a new job and they can afford something bigger, perhaps they had children and want to move closer to schools, or maybe they’re simply moving out of the area. This isn’t something you can control and it may sneak up with short notice. The best you can do is wish them the best and move on.
Sometimes tenants will move on because they’re afraid of how the market may change, how rents will increase, or if you’ve got a new property manager or the property is sold, they might fear that they’re going to have to move soon anyway, so why not now?
It could be too small or even too large. They might want to get a pet and there’s no yard or you have a strict no pet policy. Ultimately, this is another one that you can do little about beyond wishing them well when they leave.
With rents more expensive than mortgages in many areas, interest rates low, and credit scores recovering, many are ready to buy a home. Mortgage costs seem like a good deal—and having their own slice of equity feels exciting. This is one of the biggest reasons good tenants leave their current rental situation.
When it comes to selecting a tenant you are effectively trying to determine a couple of things. Firstly, that they can and will pay the rent on time and in full every single month. Secondly, you want a tenant that’s more likely to stay for a longer period.
You want to make it as easy as possible for your tenants to pay the rent. You don’t want to have to chase them constantly, and most tenants don’t want to have to deal with their landlords in person on a regular basis.
The easiest strategy for this is to use a system like Landlord Studio for online rent collection and enable your tenants to pay the rent online. Simply, invite your tenant and they will be able to set up auto-pay via the tenant portal. You can control the rent amount, and partial payments and even use the system for collecting deposits and tenant payable expenses. Both parties also have complete oversight of historical, upcoming, and processing payments.
Upgrading your property to ensure you have the amenities that tenants are looking for will not only make your property more attractive to prospects but will also reduce apartment turnover.
Keep lines of communication open with your tenants. If they complain about noisy neighbors or about maintenance issues, respond promptly and if possible remedy the issue equally quickly. Plus, it’s important to keep tenants in the loop so they know that you’re acting on their complaints.
Make sure to regularly do market comparisons to ensure you’re charging a fair market rate. As mentioned above. If your tenants think they can get more bang for their buck elsewhere there’s really no incentive for them to stay.
Your rental isn’t just an investment. It’s someone’s home. A well-maintained property is simply a nicer place to be and happy tenants are less likely to want to move. This doesn’t just mean fixing things when they break, but also regularly doing preventative maintenance. For example, make sure the heating doesn’t break in the winter or the AC in the summer. Regularly repaint, replace old and worn-out carpet, and ensure the kitchen and bathroom are modern and functional.
Finally, you can consider using rental concessions, such as a reduced rent rate, free month, or bonus amenities to encourage great tenants to stay for longer. It’s worth noting that rental concessions are not a replacement for doing the basics well. They can, however, make your property more appealing in a competitive market.
When surveyed, the ten most desired amenities that tenants wanted from their rental property were as follows:
Landlord Studio is a powerful property management software designed for landlords. Streamline your rental management, from finding tenants to filing your taxes. A few key features that you can use to improve your tenant retention include:
While there are plenty of things that landlords can do to reduce turnover, even the best tenants will move on eventually. And with vacant properties potentially costings thousands of dollars every month it’s important to have the systems and tools in place to quickly secure new tenants.
With Landlord Studio, run a professional and scalable rental business to reduce potential turnover. Our income and expense tracking tools will help you stay on top of your finances and ensure you file an accurate and timely tax return. Plus, streamline the day-to-day management of your rentals, and stay on top of maintenance tasks and important inspections.
Finally, use our rental listings feature to collect tenant applicants and efficiently run a thorough tenant screening process to ensure you select the best possible tenant for your rentals fast.