The related costs of apartment turnover are often included in discussions of the impact of turnover on an apartment community. Expenses include:
- Rent loss due to days vacant.
- Marketing expense to advertise for potential residents.
- Time and expense to screen and process potential residents.
Then there are the obvious turnover expenses:
- Maintenance labor
- Miscellaneous prep and cleaning supplies.
- Paint and carpet cleaning
- Potential capital replacements or upgrades
Your Turnover Costs
The cost of a single turn including rent loss generally starts in the range of $1,000 and can easily grow to a range of $2,500 to $5,000 depending on the capital replacements. How often is the total annual expense of turnover at a property analyzed?
Taking the total number of move-outs (including unit transfers) and applying an average expense, even in a conservative range of $1,800 per unit to determine the financial impact of turnover on a property?
With a property of 225 apartment homes and a forty percent turnover rate, that’s 90 move-outs a year, seven and a half moves a month. Using the average expense of $1,800, that’s an annual expense of $162,000. For a property with an average rental rate of $650 per unit; the turnover expense is more than one month’s gross rent potential. The expense to turn apartments is about 9% of the gross rent potential.
Unfortunately, a property with a lower average rent is going to experience similar if not higher turnover costs, so the percent of revenue required to support this expense will be higher.
Turnover is a reality of the multi-family industry. It’s not going to be eliminated, even with the best management practices. People choose apartment living for the flexibility to accommodate life style changes. But what if you could reduce turnover by one move-out a month?
A property with a 40% turnover rate that reduces their turnover by 5% realizes an annual expense savings of more than TWENTY THOUSAND DOLLARS!
In addition, the reduced turnover “adds” about 96 hours to the annual maintenance schedule, (two weeks plus) – added time for all the projects that are difficult to include in the weekly schedule.
How to Reduce Turnover
A pro-active Resident Retention Program has the potential to save thousands of dollars for a property each year. Resident retention is much more than asking a resident with a move-out notice, why they’re moving. Once the decision is made, generally, too many pieces are in motion to reverse the decision.
Maintain Tenant Communication
Maintaining communication with residents throughout the year (more than “The Rent is Due” notices, don’t park here, and other lease violations) will provide an indicator of which residents will continue to live in the local area and their level of satisfaction with their current apartment home.
Fast Service
Resolving resident frustrations throughout the year can prevent an accumulation of small concerns that roll up into a ball of frustration providing the momentum for a resident to start investigating other housing options instead of renewing in their current home.
Lori Hammond has been in the property management business for over 30 years, after starting as a part time leasing consultant. She has worked with some tremendous industry leaders such as Oxford Management, NHP Management, AIMCO, Alliance Residential, Boston Capital, The Sterling Group, P.K. Housing and currently Management Resources Development. For more information, visit her web site at www.propertymanagementminutes.com.