The Cost of Rental Turnover
Rental Turnover Cost
Rental turnover is one of the most time-consuming and overwhelming tasks for property management companies because they involve many moving parts. Property managers must coordinate with the resident to schedule move-out inspections, collect keys and last month’s rent, and determine what portion of their security deposit they will get back. In addition, they must coordinate with vendors to schedule all the repairs and cleaning to prepare the residence for rent. The most stressful part is that these tasks must be completed efficiently to lessen the negative financial impact. The longer a unit sits vacant between residents, the more money you lose. If you have a higher-than-average turnover rate, and it takes you a long time to complete a turn, you are losing more money than you realize, and your property owners and investors will not be happy.
What Factors Impact Rental Turnover
One of the best ways to minimize losing money to turnovers is to prevent them from happening in the first place. Some of these factors are out of your control. For example, one of your residents may have gotten a new job or decided to buy a house. However, poor management is one of the most common reasons residents leave a property. Renters often rent because they want to avoid the hassles that accompany home ownership. Residents don’t want to deal with maintenance or maintaining their property. If your company’s team is hard to reach or lacks direct communication, they will grow dissatisfied with your services.
Some ways you can improve resident satisfaction and improve your turnover rate are:
1: Communicate quickly and effectively: If a resident submits a work order, get back to them as soon as possible. Let them know you received their request and when the repair will be completed.
2: Keep residents informed: If you have a maintenance request taking longer than expected, or are changing a policy, let all your residents know. Keeping residents in the loop will make them feel cared for and eliminate any disputes or upset residents down the road.
3: Take care of the property: People want to live in a place they are proud of, and renters are no exception. Take care of shared spaces and keep up with the property’s curb appeal. Giving your residents a beautiful, comfortable place to live will make them want to stay longer.
Providing your residents with the best living experience possible will increase resident satisfaction and make them want to stay at the property longer, lowering your turnover rate.
Turnover Cost Calculator
To accurately calculate the cost of a turn, you have to price out everything that goes into preparing a unit to be rent ready. The most costly expense is the revenue you lose with an empty unit. Ideally, the longer your unit sits vacant, the more money you lose. This is why it is imperative to have a well-thought-out process for handling turns to get a new resident moved in as quickly as possible.
Turn costs can fluctuate based on the state of the property, the area the property is in, and rental demand. If you regularly maintain your properties and implement preventative maintenance tasks, chances are you won’t have to spend too much on costly repairs. However, if a property needs a new HVAC system, kitchen appliances, or roofing, you could spend much more to get rent ready.
Expenses add up quickly, and between lost rent, repairs, marketing, and acquiring a new resident, turnover can promptly tank your profits.
Your monthly rent is $1,200, and your unit has sat vacant for 35 days. The national average hourly rate for a maintenance technician is $20; for this example, it takes him 10 hours to turn a unit. You have already lost $1,600 in income without calculating repair costs.
Based on industry rates, the approximate price for a move-out cleaning is $100 to $355. This varies based on the size of the property and the state it was left in.
In addition to cleaning, minor repairs often need to be made to make the property like new again.
- Carpet cleaning: $120
- Window cleaning: $80
- Oven cleaning: $15
- Total One-Time Costs: $215
Cost to Find a new Resident
In addition to repair costs, you must factor in the price of advertising the unit. Whether you advertise online or utilize traditional media outlets, you often need to pay to place your advertisement. In addition, you may have to pay a leasing agent to show the property to prospective residents.
In an increasingly digital age, ensuring your property management business has a strong online presence is more important than ever. This makes it easier for prospective residents and property owners to find you. To stand out against the competition, you need a professional, visually appealing website with high-quality images and property descriptions. To attract new residents, you have to showcase your property on various media channels and showcase what it is like to live there.
Here are some of the costs associated with advertising a rental property:
- Photography and video of the property: $300
- Digital floor plan of the property: $370
- Local newspaper advertising $500-$1,000
- Social media ads $50-$500 a month
These costs will vary depending on your area, the competition, and how often you want your ads to run, but on average, you can expect to spend anywhere from $1,220-$2,170 to market your vacant properties. You will have to pay an employee to set up all this advertising, show the property, and vet potential residents.
With all these costs factored in, a unit sitting vacant for 35 days costs $3,286. Please remember that these are just estimates to help give you an idea of how much money you could potentially lose during a turnover.
This estimate will vary based on your location, the average rent costs in your area, how much vendors charge for services, and how much work a unit needs to be rent ready.
Rental Turnover and Owner Retention
As a property manager, you aim to produce revenue while keeping your assets in good condition. Failing to do this may lead to increased owner churn. Your property owners care about their bottom line, and if you have abnormally high turnover rates, their bottom line will be negatively affected. This means when you send out owner statements at the end of the year, you may receive calls from property owners upset about profit loss, or even worse, they want to find a new property management company.
Property owners are paying you to manage their property and make money, so if that isn’t happening, they will likely look elsewhere. What is the result? When a property owner leaves, you will see a huge financial hit. Not to mention it will take time and resources to attract new owners. The longer an owner stays with your company, the more money you make. In addition, keeping your owners happy is a great way to attract new ones. Word of mouth goes a long way!
We already know that residents use online reviews as a factor when deciding where to live. Property owners also rely on online reviews to determine the success of a property management company. If you can improve resident satisfaction, you will eliminate the number of turnovers you have to deal with and improve your online ratings. Property management companies with positive online reviews are more likely to attract new property owners.
How to Lower Turnover Costs
If you want to lower turnover costs, your best option is to improve your resident satisfaction. The happier your residents are, the more likely they are to renew their lease. A great way to improve resident satisfaction is to provide a seamless property maintenance experience. With a streamlined maintenance process, residents are kept in the loop about their work orders, and maintenance issues get resolved quickly. With dedicated maintenance software, you can provide your residents with a more positive experience. In addition, property maintenance software can keep track of turnovers so you can schedule turnover tasks as soon as a resident gives the notice to move. This allows you to monitor turnovers and reduce the number of days a unit is vacant.
If you are interested in learning more about our industry-leading property maintenance software, schedule a demo with our team to learn more.
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