The Costly Impact of Tenant Turnover (And How You Can Minimize It!)

A vacant unit is inherently costly for a landlord. Instead of collecting income from a tenant every month, a landlord is faced with the challenge of finding another suitable tenant.

Tenant turnover is something many landlords will have to deal with at some point. People get evicted, leave for jobs, or move to a larger home to start a family. It is simply a part of being a landlord. Unfortunately, it is also financially troublesome. However, there are steps landlords and property managers can take to minimize the losses of tenant turnover.

Analyzing the Costs

Although the loss of income coming from a rental unit is a definite negative, losing a tenant’s rent money is not the only significant cost of tenant turnover. To replace a tenant, you will have to deal with the costs of marketing and the possible repairs needed to get the property up to par.

The costs (in terms of time and money) of tenant turnover include:

• Vacancy Costs — Even though money is no longer coming in from a unit, you still have utility bills and mortgage payments.
• Travel Expenses — You might have to drive to meet with prospective tenants as you look to fill the vacancy.
• Evictions — Evictions can be a long process and one wrong step (such as trying to force a tenant out by turning off utilities) can lead to you getting sued. During an eviction, records of rent payments and leases must be carefully organized and accessible.
• Marketing Costs — You might need to spend money on advertising (including photos and classified ads) and possibly a real estate agent.
• Repair and Cleaning — The property needs to be cleaned and repaired before a new tenant moves in.

As you can see, turnover can be a significant cost. That’s why it is important to be proactive in handling tenant turnover before it even occurs and dealing with the situation as it happens.

Minimizing Tenant Turnover

To minimize turnover, you have to find another tenant to fill the vacancy. The speed at which you do so determines how many months of rent you’ll lose. Here’s a few quick tips to get your property back on the market quickly:

• In the case that you’ve been given notice by a tenant that is moving, start marketing and get the paperwork together for rental applications right away.
• Determine which kind of advertising (print, digital, flyers, etc) works for marketing in your area.
• Make repairs and conduct maintenance frequently rather than waiting until a tenant is about to leave. That can prevent tenants from leaving in the first place and cut back on preparation costs in the future.

Preventing Tenant Turnover

As soon as the lease is terminated, the process of tenant turnover is now underway. Of course, you won’t be impacted by tenant turnover if you can prevent it from happening. Here are a few preventative steps you can take:

Find and Retain Quality Tenants

Decreasing tenant turnover starts with the search for new tenants. Finding a good tenant who respects your property is an investment in itself. A quality tenant is more likely to keep your cash flow going in a positive direction rather than costing you money by damaging your property, dodging rent payments or causing trouble with other tenants.

Before renting to a tenant, you must go through a screening process and require a rental application. Check out the rental history, credit, and background of prospective tenants to determine their suitability.

Once you find the right tenant, you have to do the work to keep them. Outstanding repairs or failures to add upgrades to your rental property can frustrate tenants and lead to them not renewing the lease. Build a positive relationship with tenants by staying on top of repair, keeping communication open, and being responsive to repair requests.

Even just checking in with them every now and then can help foster a productive landlord-tenant business relationship.

Raise Rent Responsibly

There may come a time where you need to raise the monthly rent because of changes in the rental market, desire to increase cash flow, or the need to cover costs such as repairs and taxes.

A mishandled rent increase can lead to pushback from tenants and high turnover. When raising the rent, landlords should be sure to follow state laws regarding rent increase, provide notice to tenants well before the actual increase, and ensure your rent is on par with other properties in the area

Final Word

Tenant turnover isn’t completely avoidable. It is something landlords and property managers will always have to grapple with. By making smart decisions and managing the turnover process well, you can potentially save thousands and minimize the impact.