The Big Expense in Apartment Investing
Apartment investing involves managing and reducing costs. Effective apartment operations seek to minimize costs by reducing expenses that management controls and create solutions to those that are uncontrollable and unexpected. When investing in apartments, one of the biggest operating expenses that management has the ability to control is unit turn-over.
What is Turn-Over?
When a tenant moves out, the process and activities to get the unit ready for the next renter is called turn-over – also commonly known as the make-ready. Once a tenant vacates your apartment, you lose the rent revenue being generated. This negatively affects the income of operations. Operations are also adversely impacted on the expense side due to the repair costs to get the unit ready for the next tenant. You also need to consider the administrative costs to advertise/market, promote and lease-up the unit. Advertising costs money, and there’s the cost of time for personnel to answer phone calls and emails from prospects and schedule appointments. There’s also the time to show units to prospects, following-up, processing of applications and qualifying activities, such as verifying employment, income and previous rental history.
Controlling Turn-Over with Resident Retention…
Turn-over is unavoidable regardless of how well a property is managed. Every individual is unique and some will experience life circumstances that change a tenant’s personal situation, requiring them to move out. The key to reducing turn-over is having good resident retention practices so tenants do not decide to leave due to management or property related issues. Communication throughout the year with your tenants is important to achieving this – not just with a late notice. Getting tenant feedback, gives clues to their level of satisfaction with their home and community in general. Proactively reaching out, asking questions and listening to what tenants have to say creates an atmosphere of open communication. This feedback should be used to either confirm their satisfied and will continue to reside or that there are issues to address before they fester. Allowing a tenant’s issue to stay unresolved will make the tenant’s feel ignored and unappreciated. Resolving tenant frustrations before they accumulate into a mountain of grievances will prevent them from searching other places to live.
A common reason prospects call us to rent a unit is that their current management or landlord will not make repairs to their apartment. They usually talk about a list if items reported to the landlord but they’ve failed to address the issues over an extended time period. Now the prospect is frustrated and can’t take it anymore – they want out. Addressing tenant repairs in a timely manner is essential to retaining your tenants and having them stay longer. Sometimes repair requests cannot be addressed immediately or some repairs take longer than expected due to unforeseen circumstances. Communication with your tenant is important in these situations. Letting your tenant know you’re aware of their repair needs and that a work order is scheduled and it will be addressed alleviates the tenants stress and worry. Even if you can’t address it immediately, most repair request are not emergencies and tenants understand that. The point is to make your tenant feel like they’re getting good customer service and eliminate feelings of being overlooked. Tenants like knowing that their repair requests are not falling on deaf ears and that the management and maintenance staff is being attentive.
Being proactive in reducing turn-over is important for apartment investing. Knowing what affects your turnover and communication with residents is necessary. You’ll know your resident retention practices are successful when tenants stay for many years, refer their friends or relatives or they will contact you back to rent, if they had to leave. Having good resident retention practices will help reduce turn-over in multiple ways. You’ll improve your operations; reduce your cost and keep your tenants happy, motivating them to stay longer at your property.
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