A tenant moves out. Days without a tenant in the house equate to less income. On top of that, you probably have to touch up paint or repaint. You have to clean the carpet. You have to clean all the appliances and bathrooms. You may have to replace an appliance. Then there’s the extreme, that you may have to hire a junk removal company to get rid of the debris left behind and then hire a cleaner that charges a hazmat fee on top of the cleaning fee (does it sound like I’m speaking from personal experience?).
Turnover is when one tenant moves out and another moves in. The goal is to make that period of time as short as possible, or even non-existent. There aren’t always scenarios that you, as the landlord, have control over, but making a tenant feel appreciated and heard can keep them living under your roof for more than the initial lease term.
When a tenant leaves, in the best case scenario, you’re losing 1 or 2 days of income ($80). However, it’s also taken us up to 2 months to get a unit rented. That means you’re making 2 mortgage payments without income to offset them. When calculating your cash-on-cash return, the assumption is typically 5% vacancy rate, or about 18 days per year without rental income.
Then there’s the work you need to do to get the unit ‘rent ready’ again. Again, the best case scenario is cleaning the house and paint touch up. We now pay someone to come in and clean the house between tenants; it became worth the $100 to have someone come in, with the right tools, and be done a lot faster and better than I could do. The preference is to not have any carpet in a house, but we do have a few that have carpet that will need cleaned between tenants ($125). We do our own paint touch ups, so it’s typically no cost except my time because we have a standard paint color, and therefore left over paint. Quick tip: if you’re not painting the whole wall, use a paint brush to touch up the areas that need it, and then go over it with a roller to help blend it together, then you won’t see those touched up spots.
However, there may be more work to do than those quick, simple tasks that you can have lined up for 1 or 2 days. Even if the tenant treats the house great, appliances and carpeting have a useful life and may need to be replaced, which involves ordering and scheduling installation.
The end goal: keep tenants happy and not wanting to move means more money in your pocket. Find compromise and don’t always focus on your bottom line – and your bottom line will likely end up thanking you.
In 5 of our properties, we haven’t had any turnover (owned anywhere from 1.5-4.5 years). In 3 cases of turnover, the tenant left due to a job relocation. We’ve had 2 evictions. Our turnover rate for the average years we’ve owned the properties is 1.75, so the majority of the time the tenants renew their lease.
How do we do it? We create a relationship that says we’ll be responsive and listen to issues, we’re reasonable and fairly lenient with paying rent on time with sufficient notice and justification, and we provide houses that are in good condition.
We had a tenant vacate a house due to a job relocation. She had such a good experience with us, that she set us up with a new tenant for their house. Then a year later, she moved back into town and reached out to me. She said they had such a terrible experience with a landlord that if they were to rent again, it would only be from us. We just happened to have a tenant moving out because that tenant was buying her own house, and our newly vacated house fit all the parameters she wanted. That meant we had 2 days of turnover and didn’t have to list the property.
That house really needed a new paint job. We hadn’t painted it when we purchased it, and now it’s 3 tenants in. We didn’t know that until the tenant moved out and didn’t have time to paint the whole house before the new tenants were moving in. To show that we knew the house wasn’t perfect, we offered the new tenant $50 per room and $25 per paint can if she wanted to paint on her own. She was thrilled because she planned to paint some rooms to begin with, but now there was a financial incentive for her.
As for rent payments, if the tenant usually pays rent without issue and they preemptively reach out to tell us that they’ll need more time to pay rent, we’ll usually waive the late fee. Our calculations for the year don’t anticipate collecting late fees, so it’s not a loss of ours to waive the fee, but it makes them feel like we care about them as people. If you’re a tenant: communicate regularly with your landlord. Your landlord doesn’t want to evict you, doesn’t want to tarnish your record, and doesn’t want to put you in a position of financial hardship, but we can’t work with you if you don’t communicate with us.
We had a tenant ask us to put in a backsplash in the kitchen. He explained that he cooks regularly, and food is splattering on the wall, which was painted in a flat paint and didn’t wipe well (painted before we owned it). This is unconventional because it’s more than a request to fix a leaking sink or an inoperable appliance. However, we saw the benefit to install a backsplash in the longevity of the kitchen’s life and the tenant feeling like they got a ‘win.’ We agreed to do a peel’n’stick backsplash, which met the goal of a wipeable surface without being labor intensive. We even gave them options to choose from that matched the house’s color scheme. It cost us $68 and about 90 minutes of our time to install it. This tenant still lives in the home, which we’ve owned for nearly 5 years now.
We allow pets in the properties. Back when we were trying to rent an apartment for ourselves to live, few allowed pets; if they allowed pets, there was an astronomic fee associated with it. We decided to not eliminate the average 50% of pet owners by mandating a pet-free property, and we wouldn’t charge monthly pet fees or high initial fees (though we still charge some) associated with having a pet. Honestly, I have kids and a dog; my dog has never done anything wrong in our home, but my kids sure do make a mess and spill things. We have had issues with pets in our properties, but the owners have done other things wrong, so it was a poor tenant issue, not necessarily a pet issue.
I also feel that if we provide a house that looks clean and well-kept, then the tenant is more likely to keep it in that condition. We’re setting the expectation that this is the type of house that we’re renting, and we expect it to be in similar condition when we get it back. We understand paint scuffs happen, pictures get hung, and there may be a couple new stains on carpet, but the house is to be returned to us clean and put together, which is even stated in the lease. If we handed over a house that was dirty or had dingy paint and carpet, the tenant is likely to not put as much effort into keeping it in pristine condition. This isn’t foolproof. But we charge the security deposit for anything outside of normal wear and tear, and they understand this will happen from the lease signing, as well as the unspoken expectation made by the condition we hand the house over in. People are more likely to take care of properties when its condition is good enough to feel pride in, and will typically not respect it if it’s apparent the landlord isn’t taking care of it either.