Every time you say goodbye to a tenant and wish them well in a new home, a clock starts ticking. Tenant turnover is, for many landlords, the biggest challenge you will face and one of the most expensive aspects of managing your rental properties. Every tenant turnover will require a minimum budget just for upkeep, cleaning, and preparation. Moreover, every day that goes by is more lost rental income and monthly costs you’ll need to pay out of pocket.
All landlords know that tenant turnovers can be costly, but the actual expenses are more difficult to calculate. Today, we’ve put together a complete checklist of tenant turnover costs. This list can help you to predict both your turnover budget and what new tenant delays can cost you.
The Three Stages of Tenant Turnover:
Turning Over the Property
Finding a New Tenant
Time Lost Between Tenants
The Turnover Itself
The first set of costs to consider are the property basics. When a tenant moves out of your property, there will always need to be inspections, repairs, cleaning, regular maintenance, and a few updates to help appeal to new tenants. The faster and more efficiently you can perform this process, the less your overall turnover will cost. In some cases, it may even be beneficial to invest in professional work to shorten the time lapse without rental income.
The first step is always to clean your rental property from top to bottom. Even if your tenant appears to have left it sparkling, never assume the cleanliness of a home unless you know how and when someone cleaned it. Most landlords will have a favorite cleaning service they like to work. While ordering a cleaning service ensures your property is sanitized and lemony-fresh, it will be the first of many demands on your budget. Cleaning on your own can provide momentary savings, but costs in time instead.
Next is a whole-home inspection. This should be done at least once every five years to ensure there’s nothing brewing with the roof, foundation, or other structural assets. You can ensure your new tenants will be safe and catch any potential problems when you have time to do significant repairs without working around residents. Home inspections aren’t free, but they are highly advisable.
Repairs and Maintenance
From tenant-caused damage to normal wear and tear, you will need to do a certain amount of maintenance tasks and repairs. Flush the water heater, fill nail holes in the wall, make sure the dryer duct is clear, and other minor home upkeep tasks. These will cost a small amount in ordinary home repair expenses.
A fresh coat of paint on the walls is key to attracting new tenants. It makes a home look more modern, and cleaner. It saves you the trouble of trying to scrub every smudge off the previous coat of paint as well. Choose a set of neutral colors that are popular in the current housing market and decide whether to DIY repaint or hire professional painters to update your colors and freshen the home’s appearance.
The most costly part of the turnover process is often how you choose to update the property. You may want to add a kitchen island, upgrade the countertops, or replace a few of the appliances for a sleek new look. Renovated homes are more valuable and can allow you to ask for a higher rent from the next tenant. Updating your property is your chance to move up in the housing market, but it can require some remodeling investment.
Finding a New Tenant
Digital and Local Marketing
Marketing is an essential part of your tenant turnover. Most people search for homes to rent and buy through real estate websites like Zillow and Apartments.com, and you want your properties listed in such popular locations in addition to conventional marketing, such as yard signs.
Even if you are showing and touring your properties, this will cost you in a combination of time and travel expenses. Depending on how far your rental homes are from your residence, every showing comes with at least a small cost.
Then there are the costs of applicant screening, traditionally the tenant pays for this process. You need to know the rental, financial, and criminal history of your applicants to determine who can become a stable and respectful tenant.
The Time Lapse
What we have discussed so far are certain costs, the expenses that come with responsibly turning over a home from one tenant to the next. However, preparing a home and sourcing a new tenant also take time and for a rental property, time is money. Every day you spend between one paying tenant and the next can cost you in a variety of expenses.
The first and most obvious time-based expense is your mortgage payment. The beauty of a well-designed rental property is that the rent payments cover all home expenses from mortgage to maintenance. However, this also means any time spent without a tenant is when mortgage payments are coming out of your pocket.
If you usually pay tenant utilities, then these costs this month may not come out as a loss. If your tenant typically pays utilities, you are now responsible for all the electricity, water, and natural gas your property requires during the time lapse. This will, at least, be determined to a certain extent by how much you need to use the home’s utilities between tenants.
While the exact costs will vary by individual property, neighborhood, and previous tenant aftermath, the added up total can become surprisingly high. If you’re not careful, you could wipe out the income benefit of an entire year of rent with one costly turnover. For more information on how to streamline your tenant turnover and reduce the overall time and money lost in the process, contact us today!