The actual cost of tenant turnover can range from a few hundred to a few thousand dollars, depending on the notice given, the time the property is left vacant, the property condition and the number of items that need to be replaced, cleaned or repaired to get the property back to its “move-in” condition.
Perhaps the most significant expense will be actual costs that accrue while the property is vacant. When you receive notice that a tenant is leaving, you should immediately start the process of finding someone to fill the vacancy. There is never any certainty with how long the process will take, and when the current tenant leaves, so do your flow of income for the property.
Another thing to keep in mind is that your reserves will start to dwindle, the moment your current tenant leaves. The longer you let the property sit without a tenant, the more you lose, as you have to cover the mortgage yourself. Which is why we recommended above to start looking for a new tenant the moment you know you will be losing one.
This isn’t where the proverbial “buck” stops though, remember there may be cleaning costs, repair costs, and even when you do find a new tenant; there will be paperwork and man-hours before the tenant can move in and get your cash flow moving again.
Many of the larger online, rental specific, directory sites now charge to list your property with pictures or video – so depending on your chosen site listing fees can range from free to a few hundred dollars. Signs, flyers, and letters/emails to real estate agents are also reasonably inexpensive ways to get the word out about your property – but all either cost time or money to get done. Every day the property is vacant, you are missing out on money you could be making – so even if it does cost a little money, get the word out as quickly and as widespread as you can!
The vast majority of potential tenants want to see the property in person before signing a contract. You will want to make sure the property looks as good as possible before scheduling showings, which takes time. Additionally, keep in mind, scheduling showings will take time out of your day and can often create additional travel expenses.
If you still have a tenant in the property when you start showing it, you can cut down on travel expenses significantly, especially if the current tenant is willing to help you do the showings. Proper and constant communication is key to making this happen. If this can be done, it will help reduce your vacancy time, cutting down on utility and mortgage cost you will be covering while the property is vacant.
To ensure your chosen tenant is not in trouble with previous landlords, the law is in good financial standing and has a job, you will want to do some digging.
Order a background check on all prospective tenants. Remember, each report costs money, and these costs will add up quickly, especially if you are screening multiple clients. This is why an application fee is always recommended to recoup these costs.
Clean the property before the new tenant arrives. Whether you only need to dust a little, take care of some other minimal cleaning or the property requires an entire deep clean – the tenant will be more likely to keep it clean if this is how it is presented at move-in.
Cleaning costs can rack up quickly, especially if the carpet needs to be cleaned or replaced. Of course, some cleaning costs can be recouped with the security deposit, but carpet replacement and general cleaning costs are things you will take on entirely in most cases.
Appliance and fixture updates should be done while there is no tenant in the property, so during this downtime without a tenant is an excellent opportunity to do this.
Whether you are just replacing light bulbs or the property needs a complete overhaul of the kitchen and bathrooms, these costs should be budgeted for.
Stop the Hemorrhaging
One way to stop your bank account from hemorrhaging funds due to loss of rental income is to find a long-term tenant who is looking for someplace to live for a few years or more. The best way to ensure this happens is by being very responsive and communicative from the moment a new tenant arrives.
When selecting a tenant you will need to follow all fair housing rules – however, if red flags appear in a tenant application – take these flags seriously when making a final decision on whether to rent to the tenant or not.
Professional Property Management firms can always help with these tenant turnover situations – and other day-to-day property/tenant issues. Contact a Baltimore property manager today!