How do you deal with the rental gap?
Investor · Saint Paul, MN · Member since 2015 · 663 posts · 512 votes
So I've heard on this forum once before that many Landlords will have a vacant rental for 1 month after the former tenants move out so that they can clean and show the place for the next prospective tenants. My duplex rental is on it's 3rd lease of tenants and so far I haven't had that gap, but it has come to my attention that if you continue to practice your business this way eventually you'll create a problem where the current tenants overstay their lease or you don't have time to adequately clean and repair your unit between renters.
So the next question is if you do indeed have a month's gap between tenants, then how are you dealing with year leases where every year you jump a month. For example if your previous lease was a year and started in July, the next year the year lease would start in August and so on. So eventually you'll be trying to find a tenant November or December when the number of potential renters is of lowest demand.
So what is the proper way to transistion from one tenant to another in a years lease?
make the lease whatever it takes to get turnover back to a month of high traffic. perhaps a 6 or a 13 or 14 or 18 month lease. Get back in sync with the traffic time.
Does this mean then as investors we should all expect 1 month vacany a year if we are doing 1 year leases and need to properly clean and inspect and show the unit to the next prospectus tenant? And also not fall into the possible trap of tenants not willing to move out ontime, meanwhile the next tenants have already been signed and now have no where to live.
Does this mean then as investors we should all expect 1 month vacany a year if we are doing 1 year leases and need to properly clean and inspect and show the unit to the next prospectus tenant? And also not fall into the possible trap of tenants not willing to move out ontime, meanwhile the next tenants have already been signed and now have no where to live.
I always have a closed end lease with a staying over daily charge. Never month to month tenancy. This forces lease re negotiation. And puts the landlord in control.
Does this mean then as investors we should all expect 1 month vacany a year if we are doing 1 year leases and need to properly clean and inspect and show the unit to the next prospectus tenant? And also not fall into the possible trap of tenants not willing to move out ontime, meanwhile the next tenants have already been signed and now have no where to live.
You might look at this differently and consider properties and tenant matches and management that creates long term tenants. If I had frequent turn-overs all the time I'd personally think I needed to rethink my screening and fundamentally rethink the properties I owned.
A couple of good answers, including making your lease term equate to what you need it to be. I will say, being in Minnesota, you have a different reality in the winter. Here in Dallas it doesn't really slow things down much, unless it's a family home, where people may not want to move, during the school year.
With all that said, there is a reason you have a vacancy factor included in the holding cost of your rental. Hopefully, if you have high-quality units, you will have a tenant lined up to move in, as soon as the unit is available. However, you'll still need 1 to 2 weeks to clean and make any necessary repairs, assuming you've been diligent about regularly inspecting the place, you will know if there is anything major. At that point, tenant A moves out on the 30th, you have tenant B ready to move in on the 15th. They are only paying prorated rent for the partial month, but their lease still starts that month. Just let it run 12 months from the beginning of the month.
It has been my experience the tenants either stay 3 or more years or I am evicting, I have never had a tenant move out after an initial lease term. Maybe your rental process is flawed, if your tenants are moving on after just 12 months?
As to not having time to make repairs or cleaning - vendors are so important to have good relationships with so that you can move quickly - turn the unit over a weekend or couple days.
I hear folk say they can get the current tenant to show the property (include in lease) so that you can turn the unit back to back. I actually do not mind a little time between tenants to make sure I am turning over a unit that meets my requirements rather than trying to schedule repairs with new tenants.
Does this mean then as investors we should all expect 1 month vacany a year if we are doing 1 year leases and need to properly clean and inspect and show the unit to the next prospectus tenant? And also not fall into the possible trap of tenants not willing to move out ontime, meanwhile the next tenants have already been signed and now have no where to live.
You might look at this differently and consider properties and tenant matches and management that creates long term tenants. If I had frequent turn-overs all the time I'd personally think I needed to rethink my screening and fundamentally rethink the properties I owned.
@Mike F.undefined
So are you saying with your tenants then that when the last day of your tenants end you have the the unit ready for the next day for a new tenant and never have a vacant month?
If you read my post I never said I have new tenants every year? My first two tenants in my duplex stayed two years and one got a job in another state and the other wanted to buy a house, so no my screening process is just fine thank you very much.
It has been my experience the tenants either stay 3 or more years or I am evicting, I have never had a tenant move out after an initial lease term. Maybe your rental process is flawed, if your tenants are moving on after just 12 months?
As to not having time to make repairs or cleaning - vendors are so important to have good relationships with so that you can move quickly - turn the unit over a weekend or couple days.
I hear folk say they can get the current tenant to show the property (include in lease) so that you can turn the unit back to back. I actually do not mind a little time between tenants to make sure I am turning over a unit that meets my requirements rather than trying to schedule repairs with new tenants.
ok so what your saying is you don't think a tenant could overstay his welcome no matter how good of a tenant they were during the lease term and then you have to evict them? What do the new tenants do if this should happen and they are expecting a place to live. I'll need to check my state laws I guess.
As for my tenants leaving after 12 months, that has never happened. My previous tenants of both units stayed for over 2 years.
The other question that may not have been clear to you was, if the tenants lease ends on June 30th, and the new tenants are expecting to move in the next day, your assumption is that you'll have the unit 100% ready by morning?
Just my two cents thought we are in the people business and taking care of our tenants. Looking to create long term relationships. I think investors today are more focused on raising rents.Instead of keeping tenants long. This has to be a win - win for every one.Maybe I'm just one of those foolish people who see things different.
Then again we also only focus on A and B assets so less turn over.
Again just my rambling on and on
Alex
ok so what your saying is you don't think a tenant could overstay his welcome no matter how good of a tenant they were during the lease term and then you have to evict them? What do the new tenants do if this should happen and they are expecting a place to live. I'll need to check my state laws I guess.
As for my tenants leaving after 12 months, that has never happened. My previous tenants of both units stayed for over 2 years.
The other question that may not have been clear to you was, if the tenants lease ends on June 30th, and the new tenants are expecting to move in the next day, your assumption is that you'll have the unit 100% ready by morning?
The only way one of my tenants out stays their welcome is by not paying rent, then I evict. Only once have I asked someone to move out, so I could sell a property, I gave them 60 days notice which was twice the amount the lease required.
It seems like your worry is that you give someone notice to move out and they agree to do so but stay past the date you agreed to? I actually like to get a tenant out, take a couple weeks to make all of the necessary repairs, cleaning, etc. I rent class C properties, but I make sure they are the cleanest property a tenant moves into so it is typical for me to paint, clean/replace carpets, make sure the place meets my requirements. I find that tenants respect a property a lot more when it is in good shape.
Can you turn a place in over night, sure, but I do not believe you will get the highest rent when the property is not up to snuff.
The beauty of this entire thread and original question is that you can make you lease any way you want. You could make the end date in the middle of the month, chose your own term, etc. Everyone is happy at the lease signing so tenants will be very agreeable.
"If the landlord is unable to provide the unit to the new tenants by the start of the lease the lease becomes null and void."
Pretty standard language in every lease I've read.
Makes sense, I'll check my lease.
@Mike F.undefined
So are you saying with your tenants then that when the last day of your tenants end you have the the unit ready for the next day for a new tenant and never have a vacant month?
If you read my post I never said I have new tenants every year? My first two tenants in my duplex stayed two years and one got a job in another state and the other wanted to buy a house, so no my screening process is just fine thank you very much.
No, I'm saying you might want to set your goals a bit higher if you think two year tenants are a successful metric. I'm not sure which I would consider worse a 2 year tenant or a 1 year. At least with a 1 year tenant they get to pay all your expenses to get the property back on the market, at 2 years you get to since everything is considered normal wear and tear.
@Mike F.undefined
So are you saying with your tenants then that when the last day of your tenants end you have the the unit ready for the next day for a new tenant and never have a vacant month?
If you read my post I never said I have new tenants every year? My first two tenants in my duplex stayed two years and one got a job in another state and the other wanted to buy a house, so no my screening process is just fine thank you very much.
No, I'm saying you might want to set your goals a bit higher if you think two year tenants are a successful metric. I'm not sure which I would consider worse a 2 year tenant or a 1 year. At least with a 1 year tenant they get to pay all your expenses to get the property back on the market, at 2 years you get to since everything is considered normal wear and tear.
Very true! After one year, mores costs are on the landlords back.
No, I'm saying you might want to set your goals a bit higher if you think two year tenants are a successful metric. I'm not sure which I would consider worse a 2 year tenant or a 1 year. At least with a 1 year tenant they get to pay all your expenses to get the property back on the market, at 2 years you get to since everything is considered normal wear and tear.
I disagree. Two years with the same tenant is better mathematically and finacially, because if your having to change out your tenants yearly, that's twice the amount of vacancies, if your using a PM then you'll have to pay them twice the amount of rent for the first month (Renter's Warehouse requires 1 month rent for example), if your managing the property yourself then that's twice the amount of showings at least and that's time which equals money, then there's twice the amount of maintenance to turn the property over for the next renter, etc......
Hello All,
I'm a recent new member.
My leases specifically state that with reasonable notice (24hrs) I can inspect the property, make necessary repairs and show the property to new, prospective tenants. I require a written 45 day notice for termination and tenant initiated must end on the last day of the month.
As for turnover, because I have a new tenant lined up, I rarely have any vacancy. The existing tenant typically moves out before the end of the month because they want to get into their new place as soon as possible. This (typically) gives me time to get in, clean and make necessary repairs before the new tenant moves in. This typically doesn't take much time because I've gutted the places shortly after purchase so everything is in new condition. You can screen on credit scores and I learned a long time ago that those with good credit take care of their stuff and have more respect for other peoples property.
My 2 cents...
Have a successful year!
Cheers,
John
I disagree. Two years with the same tenant is better mathematically and finacially, because if your having to change out your tenants yearly, that's twice the amount of vacancies, if your using a PM then you'll have to pay them twice the amount of rent for the first month (Renter's Warehouse requires 1 month rent for example), if your managing the property yourself then that's twice the amount of showings at least and that's time which equals money, then there's twice the amount of maintenance to turn the property over for the next renter, etc......
As I said solution to the whole thing is to look at this differently and consider properties and tenant matches and management that creates long term tenants. If I had frequent turn-overs all the time I'd personally think I needed to rethink my screening and fundamentally rethink the properties I owned. You can treat the symptoms over and over again or you can cure the disease.
I disagree. Two years with the same tenant is better mathematically and finacially, because if your having to change out your tenants yearly, that's twice the amount of vacancies, if your using a PM then you'll have to pay them twice the amount of rent for the first month (Renter's Warehouse requires 1 month rent for example), if your managing the property yourself then that's twice the amount of showings at least and that's time which equals money, then there's twice the amount of maintenance to turn the property over for the next renter, etc......
As I said solution to the whole thing is to look at this differently and consider properties and tenant matches and management that creates long term tenants. If I had frequent turn-overs all the time I'd personally think I needed to rethink my screening and fundamentally rethink the properties I owned. You can treat the symptoms over and over again or you can cure the disease.
Dude your still not getting it. My former tenants were grandfathered into a lease when I purchased the Duplex back in early 2013, so when their leases were up I screened them and was able to resign them without delays. Then as I stated early one of them got a job in another state which a screening process won't pick up and the other's decided to buy a home which a screening process wont fix. The reason I posted this topic is that one of my tenants who had been great for 2 years and signed an early termination letter and paid two months of the remaining lease, suddenly lost his mind or something and trashed the place when he left, plus decided not to move out on the last day just to be a jerk. Luckily I got him to pay the last So I did my final inspection on the unit and deducted the damages and returned the remaining deposit. Luckily I was planning on renovating this unit, plus I didn't lose rent for a vacany due to him paying the last two months of his lease. But what would have happened if the new tenants were expecting to move in the next morning? So no, I don't consider this frequent turnovers with such a small sample size for anyone to make assumptions.
Luckily I have two new tenants in each unit that are signed for longer terms and I screened them using a profesional service, so I am confident that I made the right choice.
You're fixated on one part of the three items I listed. Screening is one third of the equation.
"As I said solution to the whole thing is to look at this differently and consider properties and tenant matches and management that creates long term tenants.
This discussion is way deeper than just the issue you're fixated on. All I can tell you is this same question gets asked over and over again and the answer is to avoid the decisions and properties that create turnover. Three things - property, screening, management.
Maybe you're under the belief that screening is 100% of the equation. The fact you put your screening in the hands of a 3rd party would be another issue that creates turn-over, and another discussion. Like I said a lot more to the discussion but first you have to be open to the answers to hear them. To think that the herd has everything figured out and to follow them just creates more of the problems they already have. Sometimes the answers are to zig when many others are zagging. Think about it, the majority of real estate investors don't last, the majority of them have tenant issues that drive them out sooner or later, they all keep asking about the same problem and the same people with those problems give them answers to treat the symptom instead of curing the disease. Why? Because they all have the same problem. Three things are the issue not one.
You're fixated on one part of the three items I listed. Screening is one third of the equation.
"As I said solution to the whole thing is to look at this differently and consider properties and tenant matches and management that creates long term tenants.
This discussion is way deeper than just the issue you're fixated on. All I can tell you is this same question gets asked over and over again and the answer is to avoid the decisions and properties that create turnover. Three things - property, screening, management.
I'll respond to your question of properties, tenant matches and management. First off this property is located in a trendy, millenial, good school district, clean neighborhood, low crime, close to public transit, good walking paths and to a popular tourist attraction. So when I listed both units on Craigslist I had somewhere between 30 to 40 showings and through the tenant screening company I used to perform the background check, the employment history, the credit check and so on, I was able to hand pick based on the evidence before me who I'd choose to inhabit the units. Therefore I am able to tenant match as your say very thouroughly. As for management, that is me. I do everything. In fact my service is so good to these tenants that they thank me and apoligize all the time for the help they need, such as locking themselves out or having a furnace problem. their needs are taken care of faster then any PM could every do and better.
I disagree. Two years with the same tenant is better mathematically and finacially, because if your having to change out your tenants yearly, that's twice the amount of vacancies, if your using a PM then you'll have to pay them twice the amount of rent for the first month (Renter's Warehouse requires 1 month rent for example), if your managing the property yourself then that's twice the amount of showings at least and that's time which equals money, then there's twice the amount of maintenance to turn the property over for the next renter, etc......
As I said solution to the whole thing is to look at this differently and consider properties and tenant matches and management that creates long term tenants. If I had frequent turn-overs all the time I'd personally think I needed to rethink my screening and fundamentally rethink the properties I owned. You can treat the symptoms over and over again or you can cure the disease.
You keep using frequent turnovers. Please read this again, these are only my second set of tenants I've ever had in the duplex and the first tenant who was grandfather in moved out for a new job after 2 years which is out of my control and the second tenants also grandfathered in, who live there also for 2 years moved out to buy a home which is out of my control. So the word frequent or over and over again doesn't apply here.