$12,000 Turnover!! Is this normal for less than 3 year tenant.

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$12,000 Turnover!! Is this normal for less than 3 year tenant.

Jasper Zimmerman
Realtor · Cookeville, TN · Member since 2021 · 11 posts · 3 votes

Hello,

I'm a new investor with one unit in Indianapolis, IN. I'm an out of state landlord with a property management company taking care of the house. The tenants recently moved out and the property management company sent a quote from their vendor with the list of repairs totaling $12,000. This is a 3 bed 1 bath house that is 1128 sqft. The repair work consists of drywall repair, painting the whole inside of the house, replacing flooring with LVP in 3/4 of the house, a few other minor repairs.

Is this a normal turnover price tag for a 3 year tenant?

Is my PM company and their vendor gouging me? 

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Nathan GesnerBusiness Member
Moderator
Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
4y
Quote from @Jasper Zimmerman:

Hello,

I'm a new investor with one unit in Indianapolis, IN. I'm an out of state landlord with a property management company taking care of the house. The tenants recently moved out and the property management company sent a quote from their vendor with the list of repairs totaling $12,000. This is a 3 bed 1 bath house that is 1128 sqft. The repair work consists of drywall repair, painting the whole inside of the house, replacing flooring with LVP in 3/4 of the house, a few other minor repairs.

Is this a normal turnover price tag for a 3 year tenant?

Is my PM company and their vendor gouging me? 

I'm in a small town with few options. It would cost me around $5,000 for flooring and $2,500 for painting walls. Add drywall repairs and "other minor repairs" and I could see it creeping up to $9,000. But there are many variables involved.

Your title asks, "Is this normal for less than 3 year tenant?" No, it is not normal. Even $3,000 is not normal.

An average Tenant will leave some minor damages and cleaning, costing you 50% of their security deposit or less. Nationally, I suspect fewer than 20% of all renters lose their entire deposit and fewer than 10% will leave enough cleaning and damages to eat up more than their deposit will cover (not counting unpaid rent).

This is not normal, and Tenants don't cause $12,000 in damages in just a few months. This took place over a long period of time. So why didn't your PM catch it and put a stop to it? Do they have proof of inspections over the last three years? At a bare minimum, they should have inspected once a year before offering a renewal. Your tenant renewed twice, so there should have been at least two inspections.

Either I'm missing something important or your PM is actually costing you far more than their management fee.
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  • John Clark
    Member since 2018 · 1k+ posts · 1k+ votes
    4y

    As others have said, a lot of your expenses don't appear to be tenant damage/turnover, but are actually capital expenses for upgrades and repairs. For example, did the tenant trash the carpet, or is it an old carpet at the end of it's useful life? you stated removing carpet and putting in LVP was over $5,000. What is the cost of just new carpet pro-rated for life of old carpet, and subtracting normal wear and tear to boot? THAT's your flooring turn over cost. I bet it is zero.

    Install doorbell. Did tenant break it, or was it never there? Sounds like an upgrade.

    Divert water from sump pump. Are you telling us that the tenant screwed around with the sump pump?

    Install towel bar in bathroom. Sounds like there wasn't one before. Can you say "upgrade?" There, I knew you could.

    Install pantry closet light. Look me in the eye and tell me that's not an upgrade.

    Wall/ceiling "crack" repair. Unless your tenant was swinging from the chandeliers and bouncing off the walls, you are repairing/maintaining structural issues with the house. Check your foundation and charge it to capital expenses.

    Tease out the capital expenses and upgrades and tell us what the remaining costs are. I bet the tenant should get entire security deposit back, as it sounds like normal wear and tear for a long-term tenant.

    As for the job your property manager is doing, it may be good, it may be lousy. If the property manager wants to do all these things with a vacant dwelling and get everything done right after years of not being able to really get in there and repair/upgrade due to occupancy, then that's sensible. Sounds like you have a nice place that give tenants a stable location. Where your PM falls down, however, if that is the case, is in not communicating with you. He should tell you his rationale for doing things now the way he wants to, and breaking out what is tenant damage over and above normal wear and tear for a long-term tenant from costs of restoration from normal wear and tear (which you eat) and from costs of upgrades/corrections to improve the capital value of the house.

    So you didn't give us enough information to pass judgment on either the tenant or the property manager. I can tell you right now, however, that you have nowhere close to $12,000 in turnover expenses.

    2Reply
  • Bud Gaffney
    Rental Property Investor · Boston, MA · Member since 2019 · 2k+ posts · 1k+ votes
    4y

    $12,000 is outrageous for these repairs. 8-9K range.

    0Reply
  • Stephen Dougherty
    Member since 2021 · 14 posts · 17 votes
    4y

    What was the condition of the property when you purchased it?  I would think in 3 years there would not be enough wear and tear to justify $12k in repairs and the property should be inspected each year.  I would get a different property manager.  Also, does your Rental Dwelling insurance cover it?  

    0Reply
  • Bob S.
    Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes
    4y

    @Jasper Zimmerman sound EXTREMELY high , Our avg turn is 5k, paint entire , carpet, and minor items . 12k seems as though you are being taken advantage of .Simply contact a GC there and get another estimate

    Good Luck 

    0Reply
  • Luka Milicevic
    Real Estate Agent · Nashville, TN · Member since 2015 · 2k+ posts · 2k+ votes
    4y

    I would most definitely get a second set of eyes on the scope of work. 

    Do you really have to paint the trim and the doors....

    12k in reno for a tenant if they are 3 years in the property or 3 months doesn't really matter. What matters is how they left the place. Some tenants will leave your place spotless and turn key, while others will absolutely destroy the place. 

    I would get an independent person to go check it out and just get a second opinion. 

    0Reply
  • Royce Talbo
    Investor · Kaneohe, HI · Member since 2012 · 218 posts · 104 votes
    4y

    @Jasper Zimmerman why do you need new paint? you stated it will cost $3k but is only 3 years old. it should only be touch ups if its only 3 years old. if you are going for a whole new look with the new flooring then you arent looking at a $12000 turn over you are looking at a $12000 cosmetic rehab.

    0Reply
  • Bonnie LowPro Member
    Lender · Asheville, NC · Member since 2016 · 1k+ posts · 1k+ votes
    4y

    Ouch - that really hurts. You do have some big ticket items in there that would account for a lot of what they're charging you, for instance the drywall repair, painting and flooring. You could theoretically save money on some things if you did them yourself, but you're far away so that seems unlikely and unless you're skilled, have the time and the tools, you'd end up hiring it out anyway. So I wouldn't compare it to what it would cost YOU to do it, but rather what it would cost a different handyman service to do it. There are some items that seem questionable. Like changing out to white light switches. Do you want white or are you ok with whatever is in there now? Did you ask for a full size towel bar? Re-keying locks is pretty standard. Obviously the stove needs to light. You'll want to take care of the plumbing issues like snaking the tub to see what's going on there because if you don't you could just be creating a bigger problem down the road. All of this would take quite a bit to manage and coordinate if they weren't doing it for you and yes, they're probably marking up wherever they can. It does sound like maybe the property had some existing issues -  like cracks in the ceiling? I would hope that you get a better quality tenant next time and that you ask your PM company to do a walk through before allowing someone to extend their lease so you can see if they're not taking care of the property before you get to the point you have 3 years of major damage. I have heard people say that each tenant turnover costs them $5k. I've always felt like that's a lot but we start with completely remodeled properties. For an older property, maybe it's not excessive. But if you look at it that way, you could have spent $5k each year in tenant turns, in which case being 3 yrs down the road and "only" having $12k in repairs you might be money ahead (?) Just food for thought. Much luck to you for a better tenant next time!

    [email protected]
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  • Jerry Lucker
    Flipper/Rehabber · Seattle, WA · Member since 2015 · 333 posts · 459 votes
    4y

    @Jasper Zimmerman

    With the info you’ve provided, I would guess the total should be closer to half of what they’re telling you.

    1Reply
  • Matthew Reid
    Rental Property Investor · Jonesboro, AR · Member since 2019 · 105 posts · 59 votes
    4y

    @Jasper Zimmerman

    Hey Jasper here is a calculator I have made that will calculate the cost of a rehab for you. It includes links to lowes website as well so you can order the material.

    https://drive.google.com/folderview?id=1zKbE87NGetwyDWZS_GtcxaBFJmrP4o-g

    0Reply
  • Account Closed
    Member since 2022 · 26 posts · 12 votes
    4y

    I owned and sold several homes from 1100 to 2700 sq ft, do all my work myself with one employee and it never cost me less than $6,000 to clean even an 1100 sq ft house. The prices I get just to paint walls in a house is $3500 to $7500. One 1700 sq ft house cost me $18,000 to put back together and if I hires a contractor the cost would have been $32,000.

    Welcome to the world of real estate for single-family homes where the costs to maintain the properties is about 4 to 10 times more than maintaining properties with a large number of units.

    I used to let my property management companies get estimate for repairs and the never had a magic wand, magic pills, or magic bullets and I always got my own lower prices and better contractors when I did not want to or could not do the work.

    Get your own prices, but $12,000 sound about right for a ton of things that have to be done and then you need to worry about the extras that are not on the list.

    0Reply
  • Steve Vaughan
    Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
    4y

    OOS turnkey is best suited for preservation stage investors, if at all. That's the bottom line.

    While this quote may be a bit high, rest assured it will continue to happen, evety 3 years or so, eating all previous years of 'cash-flow'.  

    0Reply
  • Seth Young
    Specialist · Southlake, TX · Member since 2021 · 213 posts · 157 votes
    4y

    A 12k turnover is insane. Was the property purchased out right or through a turnkey provider?  

    2Reply
  • AJ Singh
    Rental Property Investor · Orange County, CA · Member since 2016 · 513 posts · 374 votes
    4y

    @Jasper Zimmerman

    i had a tenant leave our rental in the same condition. Our rehab estimate is 3k without the flooring change.

    Hop on a plane and inspect the property yourself.. as suggested, work the phone for at least three other estimates. ask your Pm to put a lockbox with key on the door for your vendors to inspect and estimate the scope of work.

    Dont rush to fix till you get a reasonable estimate. This is the biggest disadvantage of OOS ownership. Unless an investor is willing to scale, it is better to have a local rental that you can manage better.

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