The actual costs of tenant turnover can range from a few hundred to a few thousand dollars. It depends on several factors, like the notice given, the time the property is left vacant, the condition of the property, and the number of items that need to be replaced, cleaned, or repaired to get the property back to its “move-in” condition. Today, we’re going over some of these costs and how to minimize their impacts so investors can maintain profitability.
Contents of This Article:
What Is Tenant Turnover?
Tenant turnover is the process of one tenant moving out of a rental property and preparing the property for another to move in. A tenant moving out is just the start of the process. From there, landlords or Philadelphia property managers have to:
- Perform a move-out inspection
- Thoroughly clean the property
- Make any necessary repairs
- Advertise the property
- Communicate with prospective tenants
- Show the property
- Screen new tenants
As you can imagine, getting this done isn’t always quick and easy. Preparing a property for a new tenant takes time and money. Next, we’ll discuss some of the costs of tenant turnover.
Costs That Impact Tenant Turnover
Landlords and Philadelphia property management companies know that tenant turnover is just the name of the game. After all, you can’t keep tenants forever! However, it’s essential to know what this process looks like and what costs to expect when one tenant moves out and you have to prepare the property for another renter. As such, here are some of the main costs of tenant turnover.
- Vacancy Costs
- Marketing Costs
- Showing Costs
- Application Processing
- Cleaning Costs
- Repair Costs
Vacancy Costs
Perhaps the most significant expense will be the 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 about how long the process will take. Unfortunately, when the current tenant leaves, so does your income flow 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. This is why finding a new tenant quickly is so crucial.
Marketing Costs
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.
That said, signs, flyers, and letters/emails to real estate agents are reasonably inexpensive ways to get the word out about your property. However, these options also cost time or money. 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 widely as you can!
Showing Costs
Most potential tenants want to see the property in person before signing a contract. You will want to ensure the property looks as good as possible before scheduling showings, which takes time. Additionally, remember that 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 significantly reduce travel expenses, especially if the current tenant is willing to help you do the showings. Proper and constant communication is critical to making this happen. If you can do this, it will help reduce your vacancy time, cutting down on the utility and mortgage costs you will be covering while the property is vacant.
Application Processing
You’ll want to run a background check to ensure your chosen tenant is not in trouble with previous landlords, can afford the rent, and is not in any legal trouble. However, this is just part of the tenant screening process. Consider contacting previous landlords, checking their credit, and talking to other professional references.
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.
Cleaning Costs
Cleaning your rental property after a tenant moves out is one of the most crucial steps in the rental process. 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, the security deposit can recoup some of the cleaning costs. But unfortunately, carpet replacement and general cleaning costs are things you will take on entirely in most cases.
Repair Costs
Appliance and fixture updates should be done while tenants are out of the property. So, during this downtime without a tenant, there is an excellent opportunity to do this. That said, repair costs in a rental property can add up quickly–especially if the previous tenant went without reporting maintenance or repair issues.
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.
Reduce Tenant Turnover Costs With BMG
One way to prevent your bank account from losing funds due to rental income loss is to find a long-term tenant looking for somewhere to live for a few years or more. The best way to ensure this happens is to be very responsive and communicative from the moment a new tenant arrives.
When selecting a tenant, you must 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.
Need More Advice? contact us today!
Professional property management firms like Bay Property Management Group can always help with these tenant turnover situations – and other day-to-day property/tenant issues. If you’re looking for comprehensive rental management services in Baltimore, Philadelphia, Northern Virginia, or Washington, DC, contact BMG today!