As any real estate investor can tell you, apartment turnover is the most substantial cost in property management. In the best of worlds, we’d never need to turn over a unit at all.
But that’s not the way this business works. So we target the next-best things:
- Minimizing turnovers to the maximum extent possible
- Making each turnover lightning fast and uber efficient
Most of this post will focus on #2, but we will offer up some secrets on #1 as well. And we’ll begin by exploring the ins-and-outs of real estate turnover—from a financial and operational standpoint. Let’s dig in:
The High Cost of Turnover
Apartment turnover is an inevitability when owning rental properties. But not all investors fully appreciate its impact on profitability. The cost of turnover extends beyond mere vacancy periods; it encompasses a variety of direct and indirect expenses that can erode your return on investment (ROI).
Direct Costs
Direct costs are immediately apparent and can be quite substantial. They include the costs necessary to get the property rent ready. For example:
- Repairs needed to restore the property to a rentable state
- Improvements that become apparent during the turnover process
- Professional cleaning, to ensure the property is appealing to prospective tenants
- Marketing of the ready-to-rent property
- Utility costs during vacancy
Often times, a repair that is not necessary when a property is occupied, such as repainting a room, becomes necessary when a property turns over, because a vacant property makes blemishes much more apparent than they are within an occupied property filled with a person’s belongings.
Data from property management surveys show that the cost of maintenance and repairs during a turnover can average approximately $1,800. However, this is a very dynamic process, and it is not uncommon for costs to be several times the average, depending on a multitude of factors.
As a general rule, expect apartment turnover costs to land anywhere from 1 ½ to 3 full months’ rent. So for a property renting at $1,200 per month, each tenant turnover could cost $1,800 – $3,600.
In addition to repairs and make-ready expenses, the cost to lease a new property is typically ½ to 1 month’s rent. At Epic Property Management, we charge a flat fee of $995 per lease up, which covers the following:
- Listing
- Marketing
- Following up on all leads
- Showing the property (sometimes as many as 50 times)
- Collecting a hold deposit
- Signing a lease
Even if you do this yourself as an owner, placing a tenant is a LOT of work and can be one of the most challenging parts of owning investment property.
Indirect Costs
While the hidden expenses of turnover are often underestimated, the opportunity cost of lost rental income during the vacancy period can also accumulate quickly. According to some reports, the average rental turnover vacancy period ranges from 20 – 30 days, translating to significant lost rental income.
On top of this, the administrative burden of managing turnovers consumes valuable time and resources that could otherwise be directed toward portfolio enhancement or other endeavors.
Tasks like coordinating repairs, marketing the property, and screening potential tenants are complex and time consuming. An experienced property management team can save valuable time and bring important expertise in these areas.
Long-Term Implications
Beyond immediate financial implications, high apartment turnover rates can have a lasting impact on your property’s value and desirability. Properties with a high turnover rate may experience accelerated wear and tear, leading to a decline in aesthetic appeal and, potentially, a decrease in market value.
Additionally, properties known for frequent changes in tenancy might struggle to attract and retain desirable tenants. In fact, it’s been estimated that properties with high turnover rates may see a decrease in value of up to 10% over 5 years, due to the cumulative effect of maintenance neglect and tenant damage.
Mitigating the Impact of Home & Apartment Turnover
Understanding the multifaceted nature of turnover costs underscores the importance of strategic property management to mitigate these expenses. To significantly reduce the financial strain of turnovers, we focus on
- Tenant retention strategies
- Highly efficient & systematized processes for property updates and marketing
- Custom technology & systems designed for speed and clarity of communication & tracking
Our philosophy on tenant retention is straightforward: offer the best property on the market, at a fair price, with the most professional management. This is easier said than done, but we’ve written extensively on this topic, so we have lots of great advice for you. This post is an excellent starting point:
It is important to remember that tenant retention goes beyond the apartment’s walls. Tenants care about the property service they receive. So your property manager should be available, professional, and highly responsive. Epic, for example, has many services designed to significantly reduce turnover rates, such as:
- Physical office hours 7 days a week until 7 p.m. every day
- All calls answered live by trained staff
- Maintenance dispatch team
- Project managers on staff
- Etc.
When it is time to turn a property over, you need to be ready. Unlike the emotionally charged decisions of remodeling a primary residence, optimizing your rental property’s turnover process should be a strategic endeavor designed to increase income and improve your price-to-rent ratio. Let’s delve into the art of executing swift, cost-effective turnovers:
Repairs & Renovations
How can you decide what repairs and renovations to make when turning a property over? At Epic, we classify repairs under 2 main categories: Required and Optional. To streamline the process, we employ a straightforward checklist to distinguish between repairs that need immediate attention and those that are optional or can be postponed.
Our landlord checklist provides some examples of what falls into the required and optional repair categories:
We use this same framework, along with our rental remodel checklist, on initial walkthroughs. It’s a quick and clear way to prioritize the tasks that are essential for maintaining the property’s safety, habitability, compliance with regulations, and appeal to new tenants.
Marketing
Great marketing is crucial to mitigating the cost of apartment turnover. Since a key pillar of any effective go-to-market strategy is understanding your audience, we recommend taking a deep dive into the preferences of the potential tenants in your property’s area. What type of property do they prefer? What level of finishes? What appliances do they consider necessary? Etc.
Once you know this, be sure to highlight those things that set your property apart, such as
- Location
- Amenities
- Size
- Distinctive features (a private yard, a 2-car garage, covered parking, specific finishes, etc.)
Use a variety of promotional channels to capture an array of prospective tenants. And then go a step further: prioritize in-person showings. At Epic, we’ve found that our commitment to in-person showings—by uniformed personnel in professionally marked vehicles—has tripled our conversion rates.
Software
The right software can streamline various processes that are essential for faster turnovers. Focusing on improved back-office operations has proven to be a groundbreaking strategy at Epic, and our custom software is the major driver in this effort. Some of the features include:
- Work order scheduling
- Turnover checklist automation
- City inspection tracking/monitoring
- Proactive pricing
- Available-soon marketing
- Quarterly water bill audits
- Advanced tenant screening
By streamlining internal systems and building out cutting-edge software to manage it all, Epic has reduced our clients’ turnover times from the industry standard of 12 – 14 days to an average of just 7 – 8 days.
Conclusion
The dynamic landscape of residential and small to mid-size multifamily real estate underscores the critical importance of efficient turnovers. By adopting strategic, service-oriented approaches and leveraging technological advancements, investors can significantly mitigate the costs and duration of turnovers, directly impacting their ROI.
As the industry evolves, the path to success is clearly paved with efficiency, innovation, and a steadfast commitment to quality. We firmly believe that the best strategy is to partner with an excellent property management team to streamline every step of the process.
If you’re interested in learning more, let’s talk today.
Pass It On: Efficient Home & Apartment Turnover and More
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