May 14, 2015
Improve Your Turnover or Kill Your Cash Flow
In property management, turnover comes with the territory. In many cases, it may be completely out of a property manager’s control. Residents move out because of a shift in their financial situation and they can no longer afford the rent, or because they want to upgrade. Sometimes their job demands that they move to a different part of the city, or to a different city altogether.
It’s estimated that approximately 60% or so of turnover is uncontrollable. So, even if you are the best management company in the world this is part of the natural cycle. In some cases, turnover can be good as it allows buildings that want to re-position themselves to increase rent with each successive resident.
However, that other 40% of turnover is completely controllable – and most importantly, you’re paying for it and subsequently hurting cash flow.
How It’s Costing You
- Preparing the vacated apartment for new residents will mean cleaning costs as well as the cost of painting and updating. You may also need to change locks or have new keys made.
- Repairing damage can carry a significant cost. If the apartment requires major repairs, it can delay the unit’s availability for rental, impacting income.
- Advertising the apartment for rent will require marketing materials and the time and costs associated with Internet Listing Services and newspaper ads. You may even need to have signs made and hold an open house to attract new renters.
- Showing the apartment requires the time of staff to take calls, arrange viewings, meet the prospective tenants at the property and take them through the unit.
- Processing applications carry the costs of credit checks in addition to verifying references, employment, income and preparing a new lease.
- Administration and accounting costs to close out the old tenant and bring in a new tenant can accumulate, particularly when refunding or requiring damage deposits.
- Rental income is lost if a new renter is not found immediately and will mount as long as the unit remains vacant.
So, what can you do to curb the flow of good tenants leaving?
Why Residents Leave
Renters will give notice when they feel dissatisfied with their experience of living at your property. When they don’t receive timely information or responses from management over an issue, or if maintenance requests are not completed in full, in part, or at all, your renter’s satisfaction, frustrations rise. The source of the problem is often simply a breakdown in communications. When nearly 40% of turn over can be prevented, it’s time to look at improving your customer service:
Maintenance Requests – Residents who make a request for maintenance are already having some level of frustration so the smoother property managers can make this process the better. However, property managers have their own concerns regarding how maintenance requests are handled in order to minimize operating costs.
To optimize efficiency, properties must coordinate multiple sites, equipment, staff and contractors to keep costs down. In order to manage maintenance requests well, property managers must be able to quickly know the status of work orders at any given moment and be able to easily produce monthly reports to keep a handle on budgets.
Communication – Property managers often try to schedule a work order as soon as possible, but it’s not always possible. Whether it’s for a single unit or for common area maintenance, the best way to combat tenant frustration is with clear and frequent communication.
Residents don’t like to be left in the dark when it comes to any sort of inconvenience or change in operations. Let them know when you schedule repairs to parking areas, elevators, or other shared amenities, or if you’ll need to shut off the water or other services to their unit. Be sure to give them plenty of notice, tell them why it’s being done, when the work will start, and when it will be completed so that they have no unpleasant surprises. As well, by sharing this information in a proactive way, you are showcasing the upgrades and improvements you are making for their quality of life.
Using advanced technology that provides a web-based portal, texting and automated calling is a great way to ensure that residents always receive up to date information no matter where they are.
Better Service = More Revenue
A minor rental increase may be the straw that breaks the camel’s back to a tenant who is frustrated with management and disappointed with maintenance services – you’ll soon find them giving notice to move. Retaining tenants by becoming a property with amazing customer service yields increased revenue by decreasing turnover and increasing demand.
Tenants who are satisfied with the communication and service that you provide will be less likely to leave, and when it comes time for a rent increase, a happy resident will be more likely to stay. A good reputation along with a lower vacancy rate creates demand for your property and allows you to command more rent when units do become available.
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