Do you know how to calculate your tenant turnover rate?
First, add up the number of tenants in your rental properties for the year. This total should include tenants who moved out, long-term tenants, and lease-renewing tenants.
Next, add up the number of tenants who moved out and divide that number by the total number of tenants who lived (and live) in your rental properties. Multiply that number by 100 to reveal your tenant turnover percentage.
A rising tenant turnover rate means it's time for a new tenant placement strategy.
Here's a closer look into tenant procurement.
Why Does Turnover Matter?
Isn't natural for tenants to move out; why does this turnover rate matter?
Tenant turnover is expensive and directly impacts your profits. Think about the time and money it takes to attract and onboard a new tenant.
Tasks include:
- Property maintenance
- Rental unit upgrades
- Property listings
- Rental viewings
- Digital marketing (including social media)
- Applications (references, interviews, processing, etc.)
- Tenant screening services
- Lease management
These responsibilities also necessitate a property manager which also adds to your expenses. A long-term tenant cuts down on these expenses, optimizing your profit strategy.
If you want a more accurate estimate, calculate your tenant acquisition rate for the year. You can get an approximate estimate by adding your marketing and upgrade costs and dividing that number by the total number of new tenants acquired.
Identify Your Ideal Tenant Placement Profile
One of the most effective landlord rental strategies is to identify your "ideal tenant" from the beginning. This strategy will save you money (and headaches) on unpaid rent, poor landlord-tenant relations, and broken lease contracts.
What are you looking for in a tenant?
For starters, you want someone who never has trouble paying monthly rent. Thus, you need a tenant with a reliable job who can prove they have the finances to pay several months' worth of rent. This point is another reason to ask for a security deposit.
You can even personalize this profile. This step will help fine-tune your property marketing. Conducting thorough market research will help you flesh out this profile, as well.
For example, a complete ideal tenant profile may include a female professional in her late 20s to 40s named "Sally." Sally works as a marketing executive and makes between $75,000 and $100,000 a year. She has an excellent rental history and is looking for a long-term living situation.
Tenant Retention Techniques
"Sally" is the type of tenant you want to keep long-term.
It's the landlord's responsibility to ensure Sally has a safe, clean, upgraded unit with access to a reliable maintenance request protocol. This is an example of a tenant retention strategy.
You can also add incentives and customize Sally's lease contract to reflect those incentives.
Discover More Property Management Tips
Remember, a good tenant placement strategy cuts costs while retaining ideal tenants. Start calculating your tenant turnover and acquisition rates to see where you stand. Next, work with a property manager who can facilitate excellent tenant experiences that drive renewals.
PMI San Bernardino boasts an impressive property management team with an extraordinary eye for detail. We don't leave any stone unturned when it comes to maximizing profit.
Schedule an appointment to learn how we can optimize your portfolio.
