High Tenant Turnover and How to Avoid it

The return on investment, or ROI on a vacant rental is less than nothing.  That is not exactly good news.  High tenant turnover can be costly and time consuming.  Not only do you probably count on rent payments to pay your own mortgage or bills, you also will find yourself in the position of frequent repairs, cleaning and marketing your property – all of which cost money…money that you will never recover.    Reducing tenant turnover is crucial to any successful property investment.  Before going into the ways to reduce vacancies, you must first understand the reasons why high tenant turnover may be happening.

Tenant Turnover

Life Changing Event – This is one of the most common reasons tenants decide to either break or not renew their lease.  This would include loss of job, transfer, or divorce.  Some areas see higher numbers of such events than others. 

High Rent and Cost of Living – While you are in the business to make money off your property investment, trying to make too much at one time can often have the opposite effect.  Some tenants, particularly those who need to move quickly, will be willing to take on higher rent in the short term, but will often be looking for lower rent options.  Additionally, if the cost-of-living increases, tenants will start to look for cheaper rental options.   

Tenant Screening – This can go both ways.  Qualified and stable tenants are awesome, but often only rent for short periods of time.  They may be new to the area and need time to research schools and neighborhoods before purchasing a home.  On the other hand, whether you are not aware, or tenants are less than honest during the screening process, unstable and unreliable tenants may leave for reasons of unemployment or financial inability to pay rent.  

Generational Demographics – If your tenant is young, it does not mean they are not established and well qualified.  However, younger generations tend to be more fluid than older generations.  While this is a reason you may have a higher-than-normal turnover rate, it is not a reason not to rent to younger applicants.  Do not forget a little thing called the Fair Housing Act

The Job Market – This is something you have no control over.  Today’s market is ever changing, and many find the need to move more often to seek suitable jobs or to simply advance their career.  

The Economy – Again this is another area outside your control.  The strength of the job market is closely tied to the economy – both on a national and local level.  A good economy gives people the ability to move from the world of renting to home ownership.  A less than ideal economy can lead to job loss or the desire to move to an area with better financial prospects. We experienced both extremes during the pre and post COVID-19 pandemic of 2020. 

The Neighborhood – The neighborhood in which your property is located can have a big effect on whether tenants rent for the long term.  Some tenants, particularly those new to the area, may find that for one reason or another they do not want to live long term in an area.  This can be for reasons ranging from safety to schools and commute time. 

Quality of Tenant/Landlord Relationship – This is something you have a lot of control over.  Most issues that arise between landlords and their tenants result from a lack of communication – mainly over repairs.  A tenant who feels they are not listened to or who consistently must track down their uncommunicative landlord is more likely to break or not renew their lease.  You may not be able to address every tenant’s individual situation or needs, but there are several things you can do to help reduce high turnover rates. 

Tenant Screening – You want a stable tenant who is financially able to pay rent monthly.  The best way to identify those tenants is through an in-depth screening process that allows you to weigh the good with the bad when approving a tenant’s application. 

Do Your Research – Do not arbitrarily set your rent.  Look at similar properties in the area and then set your rental rate accordingly.

Avoid Large Rent Increases – For several reasons from cost of living to increase in property taxes and insurance, you may decide to increase your tenant’s rent on a yearly basis.  This is perfectly normal and, in many cases, expected.  Set increases could even be written into your lease.  However, large increases in rent can suddenly turn a rental property from one that is affordable to one that is not.  

Communication – Good and fast communication is key to a successful tenant/landlord relationship.  Tenants do not want to wait extended periods of time for repairs to be made, particularly when failure to make a repair takes away from the habitability or safety of the property.  Many property managers suggest setting in place communication channels, such as text or email, which make it easy for tenants to contact you and for you to quickly respond. 

Extended Lease Terms – Consider the possibility of providing incentives for your tenants to sign a longer lease term.  For example, reducing rent in exchange for signing a two-year lease may help reduce the number of times you find yourself in the position of needing to re-rent your property. 

Be Flexible – Occasionally things happen which affect a tenant’s ability to pay their rent.  Rather than immediately beginning the eviction process, consider other options you may have.  If your tenant is facing a short-term cash flow problem, it may be a good idea to consider putting in place some sort of payment plan giving them the ability to recover and remain in your property. 

Upgrade and Modernize – If you own an older property, consider giving the look and feel of your property a makeover.  Not only will this help you rent the property, because it is more appealing to potential applicants, but it will also increase the likelihood your tenants will continue to renew their lease. 

Proper management can help reduce your tenant turnover.  However, most property owners are not professional property managers and for no fault of their own may not know how to effectively manage and maintain a good landlord/tenant relationship.  Therefore, many turn to professional property management companies like ours to help reduce vacancies and increase their rate of return. 

How does Blue Roof Property Management Stack up – We start with excellent tenant screening processes and our sturdy rental qualification criteria. Once the tenant is placed, they receive robust points of communication. From scheduled check-ins from their assigned resident relation specialist to automated follow up on repairs and scheduling. These proprietary processes directly result in our lower than industry average tenant turnover rate of 50% (41.8% 2020). We are immensely proud of our tenant retention record. It continues to be well below the national average, saving our property owners thousands of dollars in tenant turnover costs.