Multifamily Tenant Turnover: The Expensive Problem Nobody Talks About

Many landlords are concerned with rent prices and property values. Still, sometimes they're blindsided by a hidden financial killer that impacts profits even more: tenant turnover. When a tenant leaves a multifamily unit, the cycle of costs starts spinning before the door even shuts. The crazy part is that property owners don't often recognize just how impactful that turnover is until they actually sit down and assess everything from cleaning to lost rent money to marketing to the new tenant application process.

According to the statistics, it's overwhelmingly costly. Cleaning, repairing, staging, marketing, processing new applications, conducting interviews, running background checks, this could all cost thousands before factoring in a week or two (if not more) without rental income. For multifamily units, this is compounded even further, as the owners must deal with several different units. A vacancy here or there is not the end of the world; however, when turnover spirals out of control, it's devastating to cash flow projections.

Lost Rent is Just the First Cost - The Other Expenses Are Even More Costly

The first cost that comes to mind is lost rent. A unit is empty; obviously, there's no income coming through. However, what many landlords fail to consider is just how much ancillary costs make turnover even more costly than missed rent. From repairs to the turnover process to required maintenance, these little costs create a larger picture that's negative for owners.

A unit requires work every time someone moves out. Even when a good tenant maintains a space meticulously, normal wear and tear means that paint needs touching up, carpets need deep cleaned/replaced (and let's be honest 99% of people don't take their carpet with them), and repairs are required. 

A dent from a cabinet door here, a dripping bathroom faucet there, some scuff marks from moving furniture or holes in walls from picture frames give you a to-do list before renting again. None of these items are expensive by themselves, yet they add up quickly. When you're dealing with someone who hasn't respected a space at all, however, that's where the thousands come in.

Then comes the actual turnover process. Repairs need to be overseen; someone needs to be called in to perform the work, paint, clean, assist with showings, present the unit for marketing purposes; this means assessing applications and submitting processed leases as well. For those owners that self-manage, this equates to dozens of hours of time. For those who hire others to do so, this means additional costs on top of everything else.

The Importance of Knowing Why Tenants Move Out

It's easy to assume that tenants who leave want a change of pace but assessing why people move out helps owners minimize future turnover problems. For example, sometimes it's unavoidable: job transfers, moving in with family members, life events disassociated from tenancy status. However, in many cases, tenant turnover is avoidable.

For example, maintenance reports. When a tenant complains about a leaky faucet but weeks go by without response from management, they've already resigned and are seeking new spaces by the time their leases are up. They're not vocal about their dissatisfaction; they're just emotionally detached; When new applicants come in through the door seeking tenant spots, however, they're already gone in their minds. Still, failing to respond or delaying action on maintenance requests leads to even costlier problems down the road.

Rent hikes also matter. While everyone expects a bump in price upon lease renewal time, and appropriate comparison should be made with other units in similar areas, there's always a cap on how much one can ask. For one tenant to possibly leave because the owner wants an extra $100 is short-sighted; it will cost $4,000 to turn over that space and find someone new versus securing one good tenant at a lower rent.

Communication also goes a long way. Many owners fail to recognize that tenants want to be heard. When they send emails that go unanswered or receive devastating news about maintenance without credit for their pain/suffering/financial dedicated issue at stake with their monthly checks, they feel disvalued. When they become just another number on management's docket without relationship management opportunities behind the scenes, what keeps them from moving elsewhere and starting a new rental process?

The Benefit and Potential Pitfall of Multifamily Living

But with multifamily living comes unique opportunities to foster the kind of community that makes tenants want to stay long-term. That is only true when management takes proper care of the building. Nice multifamily units allow people to develop connections through community spaces; running into neighbors gives them reason to establish some sort of rapport over time; social connection becomes emotional connection becomes a willingness to stay instead of going through the hassle of moving again.

When management disregards problems like generalized maintenance (poor landscaping in common areas or parking situations) or interior unit difficulties (some tenants get special treatment while others are ignored), however, that's where interpersonal connection fails and subsequent turnover spikes are easier than ever.

Hiring a Multifamily Property Management Company

A Multifamily Property Management Company can make all the difference when it comes to preventing such transitions from being so expensive. Professional oversight often includes systems and operations that individual owners don't have time to put into place for effective outcomes, regularly scheduled inspections catch quick problems early enough before they develop into costly disasters for both new and existing tenants, systems are in place for communication turnaround instead of arbitrary response endeavors for stressed-out managers, and renewal interests happen before expiration date timeframes set anxiety in motion for tenants.

It's Not Always as Quick as You Think

The sad reality about moving tenants out is that it can take longer than expected for a transition out, and most people don't realize how long it can take from start to finish. Even if it's a hot rental market, and it rarely is due to location and timing, weeks will go by without income coming through even if you started the turnover process on day one when they gave notice.

First comes the notice period, a 30-day notice minimum but notice that's sometimes submitted halfway through or even three weeks prior generates additional time without expected rent payments if they plan on moving early anyway. Then comes the assessment/inspection phase which takes anywhere from one day to two weeks depending on how quickly you can see firsthand what's necessary for return equity.

After that comes turnover and marketing time; once it's ready for showing again, and in many hot markets, it will take at least one week for someone before expected as there needs to be pictures taken and rented quickly so as not to alienate potential income sources. Hot markets mean that units get filled faster; slow markets mean potential exposure for multiple weeks before tenants find an applicable match.

Do the calculations for units that rent out for $1,500; if you spend two weeks, and that's light, between someone giving you notice and their replacement actually stepping in and paying rent again, you're looking at $2,250 between delayed turnover and missed options for previous timeframes..

If you factor another $1,000-$2,000 worth of repairs (again assuming nothing drastic), you're looking at $3,500-$4,000 worth of expenses at one quickened unit transaction. For higher-end places or situations needing more comprehensive responses (maybe you didn't paint this time but need to next), you're only costing yourself more down the line.

How To Prevent

Decreasing tenant turnover requires practical solutions that prevent the necessary problem first before an owner has no choice but accept it. This means regular property inspections, not just annual lease renewals halfway through but spot checks annually, to catch minor issues before they become major frustrations or repairs costing more than lost rent when tenants inevitably leave.

These inspections also show tenants that someone cares about their space conditions instead of being treated like another statistic on finances.

Timely maintenance response times also matter more than owners care to admit, even if they're backed up out of town, acknowledging that a ticket was received and providing an overall expected timeline helps tenants feel respected for their investment into their living situation instead of feeling like someone who's just temporarily occupying one unit out of many.

Potential renewals should reach out months ahead instead of at squeeze timeframe options, instead of letting tenants suffer until their potential outcome gets figured out, as convenient discussions allow both parties interested value assistance instead of waiting until the last minute or deadline.

Establishing relational connections, even in larger multifamily properties, can make all the difference for discounted turnovers down the line that otherwise wouldn't have been possible anyway. The little things matter, nobody has time

The Financial Benefits Down the Road

Reducing turnover by even 10-20% can save a fortune when these stats are compared over multiple units per owner annually. For example, hypothetically speaking, for a 20-unit apartment building with annual turnover numbers around 50% (extremely common), turnover occurs naturally 10 times per year.

If each cost associated with minor renovations/outside units/costs equals $4,000 turn over, and by one person leaving each month, this totals $40k annually with an average rate higher than it should be compensated due.

If you reduce that number down either through encouragement/lower incentives or compelling reasons (various increases elsewhere), reducing this number down to 30% equals an automatic savings of $16k-$24k compared over three years with implementation strategy.

Over time that's a number worth stabilizing equity or investment not only in financing acquisitions but cash flow growth development as well.

Furthermore, lower occupancy rates matter for lenders as they will always be more interested in properties with low vacancy rates on cash flow histories with success down the line over good management strategies (and lower risk) than properties where tenants always have found "something better," which needs quick fixes or adjustments instead of those who stayed no matter what was wrong because they had an established system already.

In truth, the longer an owner attracts good tenants willing to stay and renew their leases, turnover costs less important down the line than losing cash flow stabilization means every successful alignment translate into thousands saved until it's unnecessary anymore.

They expect it when they know someone else would rather pay them down the line since it's already easier than developing comfort equity elsewhere along the way.