6 Ways to Reduce Resident Turnover Time, Costs
Out with the old. In with the new. Strategies for a painless process.
According to a survey of property management firms conducted by the National Apartment Association, 53.8 percent of respondents said their average turn costs—including lost rent, marketing costs, resident screening costs, cleaning and repair costs—range from $1,500 to $3,500 per unit. Nearly one in five (19.4 percent) said they experienced costs greater than $3,500.
Savvy apartment owners and operators understand that it’s essential to the success of their communities to minimize not only turn time—after all, every day a unit sits vacant is another day of rent loss—but turnover costs as well, since they directly impact the bottom line.
“An increase in repairs or a decrease in rents will both lower net operating income,” said Cristy Andrews, a CPA with Warren Averett in Montgomery, Ala., who regularly works with multifamily companies. That can impact your value, she said, because real estate is valued by historical NOI.
So, it’s incumbent on apartment owners and operators to carefully manage—and, hopefully, minimize—the expense of turning over a unit, whether they are hard costs like repairs, carpet replacement or painting or other costs like lost rent and marketing spend. And, with vacant apartments taking longer to rent out these days—46 days on average in the first quarter of 2024, compared to 43 days a year earlier, according to RentCafe.com—time is a factor as well.
Here’s what you can do to reduce turnover costs.
1. Be proactive
Convolo Capital, a purchaser of value-add multifamily properties, begins the lease-renewal process three months prior to expiration, according to Jeremy Thomason, the firm’s managing principal, who said the firm’s goal is to determine what the resident is doing at least 30 days prior to the lease’s end.
At that point, they walk through the unit to identify the types of repairs or maintenance needed to turn it. “The day we get the keys back, we are in that unit with flooring or whatever we need so our team or a vendor can turn that unit almost instantly,” he said.
Scott Mercado, director of maintenance for The Breeden Co., takes it one step farther. When he receives a 60-day notice that a resident is vacating a unit, he does a pre-moveout inspection with them and points out to the resident things that might need to be remedied, such as holes in the walls. Any repairs the resident completes saves Breeden both time and money.
2. Have needed materials available
By having necessary supplies on hand when the resident vacates, you can immediately start doing repairs to get the unit ready for a new occupant. Thomason said that Convolo sometimes holds vinyl flooring in a container on-site just to reduce turn time. He’ll even encourage vendors to hold inventory for him so that the company doesn’t have to tie up that money in advance. “I prefer that the vendor carries that cost,” he said. “The reason they will do it is because they want my business.”
3. Establish close relationships with vendors
Mercado has created tight relationships with company vendors that span back 10 years. “Relationships are a key point of what I do to operate a property efficiently,” he said. In some cases, he has relationships with multiple vendors in the same industry to ensure he can get someone out quickly.
Those relationships mattered when Breeden recently faced a hoarding situation at its Red Knot at Edinburgh community in Chesapeake, Va. The resident had given notice that she was leaving, but the unit required substantial work to get it ready for a new occupant.
“Even in an extreme case such as hoarding, where you’re ripping out carpeting and repainting, having longstanding relationships with vendors allowed them to jump in quickly, and that turn was very quick, so the rent loss was minimized,” said Christine Gustafson, Breeden’s vice president of marketing.
4. . . . Or do necessary repairs and maintenance in-house
One way that Petrucci Residential reduces turnover costs is handling the majority of painting in-house, according to Elisha Wolstenholme, the company’s executive vice president of multifamily housing. Having staff handle painting helps to reduce outside painting-contractor expenses and allows necessary work to get scheduled quickly. Petrucci also has its own paint color pre-selected with Sherwin-Williams that can be mixed quickly.
5. Keep up with preventive maintenance
Preventive maintenance not only helps to reduce routine work orders but also allows apartment owners to turn units more quickly and at less cost. Wolstenholme said that Petrucci does preventive maintenance four times a year, including HVAC filter changes, hot-water-heater rod cleaning and more. That has helped the company reduce turnover costs.
Don’t forget about warranties. Breeden keeps track of warranties on kitchen and bathroom faucets and other fixtures and actively uses those warranties to save money on turnover costs.
6. Have a laser-like focus on the numbers
Convolo Capital’s Thomason said that every apartment operator should have multiple staff members carefully watch the key performance indicator of “days vacant,” including everyone from the on-site team to asset managers to corporate executives. “That KPI—days vacant—includes a lot of costs, which often get buried in the P&L,” he said. “You have to have the discipline to pull them out to determine total turnover cost. You can’t manage what you can’t measure.”
Five Tips to Reduce Turnover
The best way to avoid turnover expenses is to reduce unit turnover altogether.
“Renewals are the best way to avoid turnover costs and loss of rents between leases,” said Michael Zaransky, managing principal of MZ Capital Partners in Northbrook, Ill. “In addition, a renewed resident that has a history of paying rent on time, without issues, is a known factor as opposed to a new person without a payment history at the property.”
Here what you can do to improve resident retention.
1. Meet—and surpass—the needs of your residents. Many landlords survey residents regularly for that reason. Consider conducting exit interviews with residents who are leaving to get valuable feedback about what you’re doing right—or areas that need improvement. Improve the resident experience through data analysis.
2. Provide top-notch customer service to existing residents. Handle work orders quickly and efficiently and keep the property in tip-top condition.
3. Foster a sense of community among residents. The more residents feel like the apartment community is “home,” and the happier they are there, the more likely they are to stay.
4. Avoid large rent increases, particularly in markets where there is an oversupply of new inventory. It’s better to offer residents a lease at the same rent than to scramble to find new ones.
5. Consider offering concessions. This is highly market-dependent. In tight markets, where there are multiple prospects for each available unit, concessions may not be necessary to encourage a resident to stay put. But in slower markets, it might make sense. After all, it’s better to offer one month’s free rent of, say, $1,500, than to face the possibility of $4,000 to $5,000 in out-of-pocket expenses and lost rent to turn over a unit.
