Tenant turnover is a killer. Especially for the small real estate investor. Every good landlord wants to find out how to keep tenants longer. When you have a tenant move out of your rental property, if that property sits vacant you have to pay money out of your own pocket for the monthly expenses of that property. If your tenant is paying you $1,000/month in rent, and your monthly carrying costs for the property including mortgage, insurance and taxes are $850/month, you have to personally come up with that $850 each and every month until your rental property is rented again.
The fewer units that a real estate investor owns, the more severe are the effects of tenant turnover, and thus the impact to the pocket book.
For example, let’s assume that you own one rental property, and that the property is a single family home consisting of one unit. If this one unit becomes vacant due to the tenant moving out, you just lost 100% of your rental income for that month.
Let’s say now that you own 10 rental properties, that are all single family homes. If one unit becomes vacant due to the tenant moving out you now only lose one tenth (1/10) or 10% of your rental income.
Generally speaking, when you lose 10% of your monthly rental income, this is a much better scenario than losing 100% of the rental income.
All experienced real estate investors know that they name of the game with real estate investing is cash flow management. What I mean by “cash flow management” is knowing how to maximize your revenues an minimize your expenses.
As a real estate investor, if you are able to ensure that there is less tenant turnover, you are doing a fantastic job of lowering your expenses.
One of the biggest, hidden expenses that a real estate investor can face is tenant turnover.
From my experience thus far with real estate investing, I have learned that one can minimize tenant turnover by NOT increasing rents.
When you raise rents, tenants in many instances become unhappy and start to look for rental accommodation elsewhere.
Personally, I would rather roll the dice and only increase rents once my tenants have moved out of my rental property.
Once the tenants have moved out of the property, I would re-rent the unit for the new market rent to a new set of tenants.
What do you think about this post? Do you agree with this strategy to keep tenants longer? Do you think it will work?
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Regards,
Neil.
