The related costs of apartment turnover are often included in discussions of the impact of move outs on an apartment community.
- Rent loss due to days vacant.
- Marketing expense to advertise for potential residents.
- Time and expense to screen and process potential residents.
In addition there are the obvious related expenses:
- Maintenance labor
- Miscellaneous prep and cleaning supplies.
Paint and carpet cleaning
- Potential capital replacements or upgrades.
The cost of a single move out including rent loss generally starts in the range of $1000 and can easily grow to a range of $2500 to $5000 depending on the capital replacements. How often is the total annual expense of turnover at a property analyzed? Taking the total number of move outs (including unit transfers) and applying an average expense, even in a conservative range of $1800 per unit to determine the financial impact of turnover on a property?
With a property of 225 apartment homes and a forty percent turnover rate, that’s 90 move outs a year, 7.5 moves a month. Using the average expense of $1800, thats an annual expense of $162,000. For a property with an average rental rate of $650 per unit; the turnover expense is more than one months gross rent potential. The expense to turn apartments is about 9% of the gross rent potential.
Unfortunately, a property with a lower average rent is going to experience similar if not higher turnover costs, so the percent of revenue required to support this expense will be higher. Turnover is a reality of the multi-family industry. Its not going to be eliminated, even with the best management practices. People choose apartment living for the flexibility to accomodate life style changes. But what if you could reduce turnover by one move out a month?
The property with 40% turnover rate has reduced their turnover by 5%. An annual expense savings of more than TWENTY THOUSAND DOLLARS!
The reduced turnover “adds” about 96 hours to the annual maintenance schedule, two weeks plus, time for so many projects that are difficult to include in the weekly schedule.
A pro-active Resident Retention Program has the potential to save thousands of dollars for a property each year. Resident Retention is much more than asking a resident with a move out notice, why they’re moving. Once the decision is made, generally too many pieces are in motion to reverse the decision. Maintaining communication with residents throughout the year (more than “The Rent is Due” Notices, Don’t Park Here, and Lease Violations) will provide an indicator of which residents will continue to live in the local area and their level of satisfaction with their current apartment home.
Resolving resident frustrations throughout the year can prevent an accumulation of small concerns that roll up into a ball of frustration providing the momentum for a resident to start investigating other housing options instead of renewing in their current home.