Over your career as a landlord, one of the greatest expenses you will face is turnover.
Think about it for a minute.
1. REPAIRS: When the tenant moves out, you will probably have to paint (at least touch-up) and clean the carpets. Also, you need to change the locks, and probably fix some things that are just worn out. In any case, by the time you get the unit ready for the next tenant, you will have probably spent $1,000 or maybe more.
2. VACANCY: The tenant rarely moves out on the correct day. It is unlikely to be the first, and once you get possession, you’ll have to have utilities transferred over to you to get the turnkey done. Figure two weeks (at best) to get the turnkey done, then put up a sign, post your ad on ZILLOW and Craigslist, hold open houses, and find a good tenant. Minimum: 4 weeks. Cost: another thousand bucks.
3. WAITING FOR NEW TENANT TO MOVE IN: Once you find a excellent tenant that is not a drunken felon with a history of axe-murder, they tell you they have to give notice where they are before they can move in your property. You counter that the property is ready NOW and that you can’t hold it for them (but you secretly REALLY want them as tenants. They finally offer to move in and start rent on the first of NEXT month, even though they will be paying double rent for 15 days (or something like that which has NOTHING to do with you). You accept because you don’t want to lose the tenant. Another three weeks vacancy: About $750
This is just an estimate: $1000 for turn key, $1000 in lost rent, plus $750 in more lost rent.
If the property rents for $995/month, you have just lost 23% of your projected revenue for the whole YEAR, all because your previous tenants MOVED OUT!!!
1) Be responsive: If they call you with problems, acknowledge the call and act on it right away. Do not ignore their calls. Make sure to answer their calls or return their calls the same day if possible. There is nothing worse than a feeling of being neglected or ignored. I also recommend you keep a log of all communications, but that is for YOUR protection, not their enjoyment.
2) Address problems quickly: If your tenant calls complaining of a leaky faucet, or a squeaky door, make sure to address the problems and fix them quickly. Do not wait for the tenants to complain several times before you can address them. Call a contractor if you cannot fix it yourself. If the problem would need time to fix, explain to the tenants so that they have a better understanding of what is going on. Another reason for responding quickly is to limit your own liability in the case of a possible threat to your tenant’s safety and/or security. Once you have been notified of a problem, liability is shifted from the tenant to you for damages which may result from failure to make the repair.
3) Find ways to please: Aside from addressing their “fix-it” calls, you would need to find ways to please your tenants. Remember, you are not doing them a favor by having them rent your place in this kind of market; it is them that are doing you the favor. What we have been doing is giving them $25 gift cards to HOME DEPOT to make our tenants feel welcome. The good news is that they will likely end up spending the card on something to repair or improve my property. Another thing we have done is give good tenants a two hour free period with our handy-man. They can ask him to do anything they want, from changing out a light fixture to fixing a leaky faucet. This only costs me $40, but is very popular with tenants. In addition, my handyman already knows what he is and is NOT supposed to do.
5) Perform regular maintenance: Do not leave your units in neglect. Perform annual safety and security inspection on each unit and address the things the tenants may not notice but could be potential problems down the road. If you have a lawn, make sure to have them mowed regularly. Change the light bulbs in public or shared areas, these are your responsibilities.
6) Respect their privacy: You may own the property, but that doesn’t mean that you can wander in anytime you want. Unless there is an emergency, make sure to call in advance and schedule a visit if you need to address some issues with your tenants.
7) SAY WHAT YOU WILL DO, THEN DO WHAT YOU SAY: Do not over-promise just to get a tenant in the door. Once they see that you do not intend to deliver, they will leave. Instead, if you make a commitment to a tenant, follow through. Same thing goes if you tell them they must pay the rent on time or they will be fined. Say what you will do, then do what you say!
8) Especially in a multi-unit property, be careful about choosing other tenants: It really comes down to screening your potential tenants well. Make sure to do a thorough background check, such as the one offered by SMART MOVE. If there are tell-tale signs that they have been problematic tenants in the past, do not accept them. You may gain one bad tenant but the good tenant will be gone when problems arise.
9) UNDERSTAND, ABIDE BY, AND ENFORCE the LEASE AGREEMENT: This is a no brainer – if you do not do what your lease says, you will definitely lose your tenants. In some cases, they do not even have to be bound by the lease because of breach of contract. Don’t find yourself in a courtroom because you get sued by your tenants.
10) Do not automatically raise rent year after year (even tho I tell you elsewhere to do just that): Always consider the costs of a turnover before raising rates. It may not be a bad idea to keep the same rate for the second year so as not to lose your tenants. Keep in mind that you will lose more money when you do not have tenants while your units are empty. A small amount of rent increase is not worth it compared to the amount you will lose while you find tenants to rent that empty unit.