When many people start looking for a new home, they wonder what they should choose and how much of an investment it will be. Although many people aren't quite sure about what their new home will look like, the fact of the matter is that there are many aspects to be mindful of when it comes to real estate. From paying attention to how much things cost to looking carefully at your options, it really pays to understand and apply a little wisdom before you break ground on a project. Check out these posts to find out great tips about real estate.
There are a lot of factors that make a rental property business profitable or not, and one factor is the turnover rate. A tenant turnover rate is a term often used in the rental property industry, and it is essential because it affects your company's profitability. If you do not know what this is, how it works, or the effects it has, here are several things you should know.
The Definition of Tenant Turnover Rate
When a tenant moves in, you probably require a one-year lease. Requiring a one-year lease gives you a higher guarantee the tenant will stay there for a year, but it does not mean the tenant will renew it and stay another year. Tenant turnover rate refers to the frequency in which tenants move out when their leases end. A low turnover rate means that most tenants stay longer than a year. A high turnover rate means that tenants move out quickly once their contracts are up.
The Effects It Has on Cash Flow and Profitability
The turnover rate of your business affects its profitability and cash flow. Each time a tenant vacates a unit, it costs money. You cannot rent out the unit on the same day as the tenant moves out. Instead, you probably must prepare the unit and look for a new tenant. You lose money from having a vacant apartment, and you have to repair and renovate the unit. The bottom line is that a high turnover rate results in a loss of income and an increase in expenses.
Ways to Reduce This Rate
One of the goals you set as a landlord should be to decrease this turnover rate, but how do you do that? First, you can try running more effective screenings on your tenants. Second, you should provide excellent rental properties and timely maintenance and repairs for your tenants. Third, it may help if you offered incentives to the tenants. Finally, you will likely see an improvement if you hire an expert to help you manage your properties.
If you are struggling with a high tenant turnover rate, your business is probably not as profitable as it could be. You can change this, though, and the best way is by hiring a property management company to take over some of your management duties. When you do this, you may see a decrease in the turnover rate and an increase in your cash flow and profits.
To learn more, contact a property management company.
Share13 March 2020
