Did you know in 2019, over 5 million Americans and Canadians vacated their apartments due to housing issues? Keep on reading, to learn ways for reducing your tenant turnover rate.
Losing tenants can be a nightmare for any property manager or landlord. We get it, keeping tenants happy and getting them to renew their lease is not an easy task. An increase in the vacancy rate not only demands an investment of your time and resources but also affects your bottom line.
A high tenant turnover rate is something that keeps many property managers up late at night. But don’t worry, we know exactly how you can make the most out of your properties!
Before we get into tips for minimizing your tenant turnover, let’s have a look at the costs attached to it first.
High tenant turnover rates are detrimental to your business’ profitability and smooth growth.
On average, tenant turnover costs around $1,825 every time a unit goes vacant.
So, if you're not keeping a close eye on your turnover rates, you're risking the chances of a high vacancy cost build-up.
To prevent yourself from any unwanted surprises, you need to examine all the costs attached to tenant turnover beforehand. These range from cleaning or repair costs to costs incurred while showing your rental property.
A cost breakdown will help you manage your finances efficiently and visualize the advantage of reducing turnover. Here are some costs property managers incur when their property is sitting vacant for too long:
First and foremost, the cost that hits property managers and landlords really hard is the loss in rent per day. The longer your property is vacant, the more rental income you lose, thereby reducing your cashflows. This cost depends upon the size of your property but on average, it costs around $1600 per unit.
Screening tenants is one of the most grueling tasks for a leasing agent. Once you find your top three potential tenants, you now have to pay for credit checks, spend time talking to employment and personal references, go through income documents, and much more. All of this takes a considerable chunk out of your pocket in terms of money spent on checks and staff time spent, which could be spent on promoting your company and other vacant units.
Until virtual tours become the new standard, tenants will always make a final decision after a showing. You have to visit the property multiple times a week for rental showings, which leads to unwanted transportation expenses and time spent on no-shows.
Showing a rental property is not as easy as it sounds. Sometimes tenants cancel at the last moment, and sometimes you end up showing the property to unqualified tenants due to an inefficient screening process. To save you from all this hassle, we recommend automating your leasing process through an AI assistant such as River. River pre-screens tenants, schedules tours, and responds to renter emails, saving up to 70% of your leasing team’s time that can be spent with only qualified prospective tenants.
Gone are the days when a “For Rent” sign would attract quality tenants for property managers or landlords. With high competition in the industry, you can’t rely on word of mouth solely. You have to market your vacant properties on good online listing websites and rental housing boards, which is often expensive. And if that doesn’t work out, you might have to spend on hiring a marketing agency or leasing specialist to take charge.
Can you welcome a potential tenant to a dirty place? Will that convince them to show interest? No! You need to spend money on cleaning and repairing and make it move-in ready.
Whenever a renter leaves, property managers incur a considerable maintenance cost for deep cleaning the property. It includes the cost of repainting, cleaning carpets, fixing locks, windows, roof, toilets, and more.
Every time a new tenant is onboarded, property managers have to go through the painful legal process of getting lease agreements signed. It could include anything from the time spent by leasing staff on preparing and going through lease terms with potential tenants to paying for software to automate the whole experience.
Now that you know all about the costs associated with a high tenant turnover rate, let’s dig deeper to find out why are your tenants leaving?
According to a research conducted by the United States Census Bureau in 2019, 17% of the Americans vacated their apartments due to housing-related issues. These issues include factors such as maintenance issues, lack of communication, and an abrupt increase in rent.
Where you can certainly work on these issues to minimize your turnover rate, there are some reasons that are even beyond a property manager’s control. Renters often leave because of job relocation, family related issues, or a change in marital status, making vacancy inevitable. That’s why we suggest focusing on factors which property managers can overcome by building strong relationships with their tenants.
It is very time-consuming to build a good relationship with your tenants while pushing hard to grow your portfolio and manage other gazillion tasks. Many property managers fail at doing this. Finding it hard to believe? Just Google any random property management company and look at their Google or Yelp reviews, you’ll get your answer pretty much right away!
Whether you are a property manager or a landlord, nobody likes going through the cumbersome tenant move-out process every summer. Here is a list of potential factors that might make your renters switch:
Nobody likes living in a place that’s breaking down all the time. The longer it takes to resolve maintenance issues, the more frustrated your tenants will get. Renters who have the option to move out will never tolerate pest infestation, leaky roofs, smelly surroundings, or clogged toilets. And oh, they will also leave you with negative feedback after moving out, ruining your brand reputation.
Your job as a property manager doesn’t end once your apartment or house is rented. You need to create an open mode of communication between yourself and renters. Being always available for your renters solves minor issues such as tenant clashes, noisy neighbors, or any maintenance problems.
Poor communication prevents these issues from reaching you, and tenants prefer moving out instead of voicing them all the time. Whereas good communication is a sign of a healthy relationship and lets you learn about issues before they become a problem.
Renters often move out because they are unable to afford an increase in rent. Any unplanned expense, such as a mishap, loss of a job, an accident, or an expensive medical condition, might trigger them to move out.
For any reason, rent increase often forces the tenants to compromise on food bills, transportation bills, or home heating charges. And they choose to move to a smaller unit.
Vacancy rates in an insecure, noisy, or abusive area are often high because home is a place of peace and comfort. Imagine coming back from a hard day’s work and dealing with loud neighbours or construction work nearby.
Healthy, cooperative, and peaceful surroundings attract more renters. So, if you are screening some suitable tenants for an unsuitable neighbourhood, maybe it’s time to improvise your screening criteria.
Many tenants will relocate after a change in their relationship status. People who are going through a breakup, separation, or divorce will start looking for a smaller place. Or vice-versa in the case of growing families.
Job relocation is another reason why properties go vacant. With 31.2% of the renter population being millennials, there is always a possibility of them moving around a lot. Many renters relocate for a convenient commute to work and move to areas closer to work due to high transportation costs. Not everyone uses Uber all the time!
Attracting a lot of good tenants is difficult these days, as people know the market very well. They will research property management companies in the area they are interested in and read reviews before signing up.
Here are some proven ways guaranteed to help you in maintaining better relationships with your tenants, thereby minimizing your turnover:
Consider your tenant’s current circumstances before increasing rent. Always explain your rent increase policy before signing any lease agreements.
Ensure the decision is based on family size and affordability. And if they leave, will you able to cope up with it in the most profitable manner? If you can’t, better not invest more of your money in screening a new renter. Compare the cost of having a tenant leave vs. the cost of not increasing rent. Sometimes it makes more sense to negotiate the rent with a current tenant than bear the revenue loss from a vacant unit.
While screening tenants, make sure they are the best fit for your property. Here are some recommended things to do:
Want to streamline all of the above? To make your life easier, you can use an AI-powered leasing assistant like River, which takes care of renter inquiries, prequalifies renters, and books tours without you needing to hire new staff.
If you think you’re missing out, take help from a tenant screening service and outsource the whole process. Invest adequate time in choosing the right renter with a long-term commitment and maintain a low vacancy rate for your properties.
Tip: Never ignore your gut feeling. If a tenant sounds fishy, investigate more.
Make efforts for your property and value your tenants. As a competent property manager, you should always prioritize tenant maintenance complaints and keep an immediate maintenance service ready.
Establish an open communication channel and be responsive to build trust with tenants. Remember to:
Doing so will retain your tenants for another year and reduce your future costs from vacancies.
People might not be happy with your current policies, so look around and see what other companies are doing. If you are lagging behind, try revising the insurance policies, pet policies, or leasing agreements and take legal advice when necessary.
Tip: Always mention security deposits, damages, and cleaning fees in your lease.
Always be honest with your tenants, and don’t give them false hopes. If you need more time to repair or fix some issue or need to increase rent, be open, and let your tenants know well in advance. Transparency leads to developing trust, and guess what? You might even get an honest company review!
Do your best to provide incentives. Incentives can act as a motivation and relationship boost. Whether it’s a $20 discount or a small gift card as a gesture or a simple handwritten note that can make your tenants feel valued. Give them reasons to stay with you. You can offer them property upgrades, extra security, or discount vouchers.
The best way to understand a problem is to ask about it from the one facing it. Feedback can be in the form of a survey or an interview that you can conduct every six months. You can try using free software available on the internet, like Survey Monkey or Google Forms.
Although an interview is more personal, we recommend taking surveys for quick tenant feedback. But make sure that it’s short and straightforward. You can even tie in an incentive to this.
Would you rather deal with every tenant inquiry, reply to every email, schedule tours, conduct prequalification checks yourself, or would you prefer automation- that takes care of EVERYTHING?
We understand you have many duties on your shoulders, which is why we recommend automating your workflow processes. Moving to AI-based solutions will save your time spent on mundane tasks and inquiries. You can utilize that time to build better relationships with your tenants and grow your portfolio.
The problem is not always with the property, neighbourhood or policies. At times, it is the wrong marketing strategy. Property managers need to know the right marketing channels to generate quality leads.
If renters are looking for a rental place on social media, and you are only using Craigslist for rental advertisements, then it is a waste of your time and money. As a property manager, you should understand where your target audience is spending time and then create a marketing strategy around it.
If you are having trouble getting started with marketing, outsourcing it will do wonders for your property management business.
Bid farewell to your tenants on a good note and make the most out of their departure. Conduct an exit interview and ask them why they are leaving and document everything. Try organizing a set of simple questions and conduct a short online survey.
A few good reviews from happy customers can help you in achieving your business milestones. Positive reviews add authenticity to your site and attract more tenants. These renters are valuable for generating further leads. You can create a pool of prospective tenants for your property through referrals.
High tenant turnover rate is a serious issue that landlords and property managers need to manage smartly. Property managers and landlords need to work on their relationships with tenants to minimize vacancy and turnover rates. A low tenant turnover rate represents your brand's brighter side, resulting in a high Return on Investment.
We suggest sitting down with your team and going through all the problems causing turnover rates to go up in your company. Once you have a list of problems identified, brainstorm solutions with your team (if you have one). Then, jot down all the solutions you want to try and make a 60-120-180-day implementation plan. Track your plan’s progress, measure, and reiterate until you reach a point when your tenant turnover rates start going down.
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