Tenant turnover can kill profitability, costing landlords thousands of dollars per month. Finding ways to avoid tenant turnover and prevent vacancy in your rental property is crucial to success, and understanding the trends that impact the average tenant turnover rate is a key piece of the puzzle.
Landlords and property owners are frequently found scratching their heads, wondering how they can improve their retention rates and decrease their vacancy. Although it’s imperative to respond to maintenance and repair requests in a timely manner, data suggests that external variables apart from your management may play a larger role in tenant turnover.
Research shows that both low median age and high job growth correlate to lower retention rates in cities across the United States, while rent growth seems to have no effect on turnover. Certain amenities can persuade tenants to stay, while others have little to no bearing on the decision. 94% of renters in community housing, for example, are looking for available parking, while 94% of renters in single-unit homes prioritize high-speed internet.
Here’s an in-depth look at the costs and causes of tenant turnover, and tips on avoiding it:
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Finding a good tenant is one of the primary keys that can increase landlord profitability. We see that the average tenant turnover rate costs $1,750 per month that the property remains vacant. Landlords and property owners incur a multitude of expenses during tenant turnover, which cost not only money but also time. Once the unit is vacated, they must clean the property and repair any damage, which usually entails new carpeting and a fresh coat of paint. After it’s been restored, they need to create ads—often times on paid-for sites or classifieds. To expedite tenant turnover and fill the space as quickly as possible, they need to host frequent open houses and schedule back-to-back showings for potential renters. Each renter who does apply must be processed and screened, so as to reduce tenant turnover in the future.
Furthermore, the average tenant turnover rate is higher in markets with older median ages, but lower in markets with high job growth. As such, we could surmise that tenant turnover decreases as people inch closer to forty and “settle in,” but increases in areas that people experience frequent employment opportunities. Although this may vary by city and demographic, one factor appears to remain consistent: higher costs of rent does not appear to affect turnover rate. Property Management Insider analysis shows that the annual rent growth spans from 2% in New York and Indianapolis to 10% in San Francisco and Denver, but retention rates remain north of 47%.
A 2017 SmartMove survey revealed that 53% of landlords across the United States report experiencing lower than 10% of tenant turnover—with the exception of the Southeast, where 63% of landlords experience such stability. But what about the other portion of landlords (47%) who deal with a larger average tenant turnover rate? Research suggests that in order to avoid tenant turnover, they need to upgrade their rental properties with in-demand amenities such as on-site washer and dryer units. They also need to keep rent fairly priced, maintain the property, and respond to tenant requests in a timely manner.
One of the best ways to lower your average tenant turnover rate is to run comprehensive screening on rental applicants. The more you know about your prospective renters, the easier it is to land a long-term tenant. Thorough tenant screening processes can help you get a higher quality tenant with a longer average tenure in your rental unit. TransUnion SmartMove offers detailed reports that including a credit history check, eviction history check, and rental criminal background check so you can find the right fit for your rental property.
SmartMove also provides landlords with a ResidentScore, which is a credit score built to look at the outcome of a lease. Based on TransUnion Rental Screening analysis, bad outcomes occur 24% of residential property rentals. Finding an applicant with a good ResidentScore could lower the average tenant turnover rate. ResidentScore calculates a variety of factors to provide a snapshot number of one’s predicted tenant performance. SmartMove’s updated ResidentScore predicts the risk of an eviction 15% more often in comparison to a typical credit score, which helps avoid premature tenant turnover.
Although renters may come and go, influenced by age, amenities, and job availability, it is possible to improve retention rates by making sure you lease to the right person in the first place. Eviction processes are expensive, compounding on the already sizeable costs incurred during tenant turnover. Protect yourself from a potential loss of revenue using TransUnion SmartMove rental screening and sign your next lease agreement with more peace of mind.