In real estate investing, the common sentiment is that you make your money when you buy. And while this may be true in one sense, it’s impossible to remain profitable without finding and keeping the right tenants. High turnover leads to extended vacancies, which creates serious cash flow problems. The best way to avoid these issues is to keep your tenants happy and engaged.

The Dangers of High Turnover

According to a study of nearly 2,000 landlords, 18 percent of respondents say that a high turnover of tenants is the most stressful part of their job. This far exceeded the next most common response, which was related to tenants not paying rent (12 percent).

source:baymgmtgroup.com

The fear of high turnover is justified. For starters, high turnover eats up unnecessary amounts of time and energy. When a tenant ends a lease agreement, you have to deal with paperwork, inspections, security deposits, cleaning, repairs, property marketing, tenant screening, property showings, etc.

Secondly, turnover always leads to the possibility of a vacancy. And while most savvy landlords factor in at least one month of vacancy per the calendar year, it’s always possible that one month turns into two, which turns into three, and so on and so forth. At some point, too much vacancy can actually lead a landlord to default on the property.

The Secrets of Limiting Turnover

 There will always be some turnover with rental properties. The key is to prevent frequent turnover. The longer you can keep tenants in place, the less costly and risky things are for you.

source:baymgmtgroup.com

Having said that, here are some secrets to limiting turnover and keeping things profitable:

1.  Take Screening Seriously

 The first step to reducing turnover is to get the right people in your properties. A good screening process, while never perfect, allows you to avoid high-risk tenants and zero in on the ones that are most likely to stay long-term.

Good tenant screening is thorough and deep. It includes a background check, reference check (including current and past landlords), employment check, application, and in-person interview. The more you get to know an applicant, the more you’ll learn about their character.

2.  Incentivize Long-Term Agreements

While six- and 12-month lease agreements are the standard in most areas, there’s nothing stopping you from going after a long-term agreement of 24 months (or more).

Most tenants won’t sign a two-year agreement without being incentivized. Think about the things your tenant’s value and try to use these to your advantage. For example, you may guarantee no rent increases for any tenant who signs a two-year agreement upfront. Or maybe you could offer the first two months free? Would throw in a free 50-inch TV do the trick? Feel free to get creative.  

source:beqom.com

3.  Nail the First Impression

 It might seem like a small gesture in the grand scheme of things, but anything positive you can do when your new tenant moves into the property will set a good first impression.

“The first few hours of a tenancy are significant. If the renter has a bad experience, it’s going to put them in a bad mood. As a result, other problems, which may be small and innocuous, are magnified,” Green Residential explains. “On the other hand, if a tenant has a good experience the first day, it puts their mind at ease and makes them feel like they’ve made a wise decision.”

4.  Avoid Big Rent Increases

Naturally, landlords want to raise rents overtime to keep up with increases in the market. But think twice before you raise rents significantly. It may cause you to lose a tenant or two.

If you run a cost analysis, you’ll find that it’s typically far more cost-effective to maintain your current rents and avoid turnover than it is to risk losing a tenant at the expense of earning a few extra dollars each month.

Putting it All Together

source:wikihow.com

Every landlord needs a turnover strategy. A strategy alone won’t prevent tenants from leaving, but it will greatly reduce the rate at which they opt-out of lease agreements in favor of another comparable property. Try implementing some of the trade secrets mentioned in this article and see if they positively impact your rates this year.


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Arni Barni

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