Average tenant stay and turnover cost in Indianapolis

28 Replies

Are the majority of tenants from Indy staying in a property for 12 to 18 months, destroying the property and then moving to the next remodeled property? Or is it just my luck?

One of my tenants left on December 31, after being in a property for a year, and I received a quote of $8,400 to make it rent ready again. My average turnover seams to cost around 5-6k. I have to replace the carpet almost every time when a tenant leaves, how can they destroy it that much in 1 year?

How can you make money when your cash flow is a few hundred a month?

Sometimes it can be the quality of the property or of the management team you put in place.  You also might try to tenant proof your properties as much as possible (especially for lower end properties) with things like laminate flooring which do not wear out as quickly or stain as easily.

You may want to look over the $8400 estimate.  What type of property is this?  Does PM profit from expensive turnover?  I find very often that a turnover can be done for much less than an owner is being quoted due to their existing manager's profit model.  

Also, if there is that much it is not normal turnover but damages and you should be asking the PM about pursuing a judgement. 

It's an SFR 1792 sf, in a decent area, at least it was a few years back when I bought it. The rent is over 1k.

I have 2 quotes, the big items are:

1). Heavy Trash Out - $1250

Replace worn carpets and pads in 6 large living areas - $3750

Patch and touch up walls, ceilings, and closets - $625

Full paint on trim, interior doors, HVAC vents and window seals - $1250

2). Trash out Dumpster Crew needed$1,375.00

Full paint an minor wall repair$2,750.00

Replace vinyl in kitchen and laundry$875.00

Carpet Cleaning$262.50

The second quote is cheaper overall, because it doesn't include carpet replacement.

I don't know how much the PM is profiting from expensive turnover but for sure they profit from the turnover because they charge again for the first month rent from the new lease.

@Ciprian L. - It has nothing to do with Indy, but the type of tenants.....

I have always at the higher end of rental market, my condos are like $4000 to $4500  per month... Turn over is like every 3-5 years, 2 stayed 7 years and counting....Upon turnover, my typical cost is $0... Literally....Tenant would call professional cleaning upon moving out

This is the one thing that I cant figure out, to be honest, that the lower the rent, the more turnover..... One would expect the opposite, won't you????

@Jay Hinrichs - exactly how you described, right? 

@Diane G. That's why I didn't buy 30-60k properties, the average price for my Indy properties is around 100k and the rent 1100-1200 a month, and that was 5-6 years ago. 

I have a duplex locally that I use to house hack and it's doing much better than my out of state properties.

I started investing out of state because almost everyone was saying that there is no cash flow in LA and everything is so expensive. Now I know better and didn't buy other out of state properties since I started investing locally. My turnover costs and vacancies are much lower locally. 

When I see the $1300 just to cleanup the mess that the tenant left, it makes me want to hop on a plane and just do it myself.

@Ciprian L. , I agree with @Aaron Klatt 's idea of using laminate for the floors and making your rental dirt-proof. Laminate should have around the same installed cost as carpet, and can be used pretty effectively in wet areas like kitchens and baths, so you don't have to worry about replacing peeled/bubbled sheet vinyl or linoleum either. It's also super easy to clean,  pretty scratch/dent resistant, and can usually be refinished once or twice depending on the quality. LVT is also a great upgrade.

Consider this: Laminate is about $5/sf installed, and can be refinished for about $3/sf by stripping and reapplying finish (no sanding). Given it's durable, you might refinish every 5 years. Places like Lumber Liquidators usually have deals-of-the-week for $1 or $2 per square foot.

For a 1000sf rental, your average annual capex for flooring over the 9-year lifecycle of the floor is ($5,000 + $3000)/9 = $889 per year.

A nice wood laminate might even help you bump up the rent and get better tenants.

@Eike Maas I was thinking about replacing the carpet with laminate on my last turnover but the price was more than double than the carpet and in a house that big is a lot of money. They said that it's not going to make a difference in rent price. I checked other properties in the area and  almost all of them have carpet, I think it helps in the winter to have carpet, probably is not that cold.

Every time a tenant moves out I'm amazed of the mess that they leave behind, it looks like nobody cleaned the house since they moved in and there is a lot of destruction. It's hard to believe how some people live. Probably the only way to make it tenant proof is tile, which I don't think is an option with the cold that they have over the winter months.

I'm waiting for some advice from a local Indy investor from the forum to see if changing the flooring to laminate would make a big difference.

@Ciprian L. I'm having great luck with the laminate in my rentals around Indy, especially in the living areas.  I typically put it in the bedrooms as well, and get a cheap area rug if they ask about carpet or seem worried about cold floors.  Most will appreciate the ease of cleanup with the hard floors as well.

Let me know if there is anything I can help you with being local.

@Diane G.   As you are well aware I find myself in a few hundred of these rentals pre rehab every year when I go to my markets on inspection trips.

its simply amazes me how people live.. it really does.. I mean they must just spill on the carpet and never even bother to wipe it up LOL....

The best ever I saw for tenants was a 30 unit all section 8 I bid on in Hattisburg MS.

Cinderblock construction with no sheet rock just the cinder block on the inside painted..

concrete floors all sloping to a clean out like you would get in a gymnasium.. concrete counters and stainless doors on the cabinets.. Only a refer and stove  .. no garborator no dishwasher no laundery.

so at tenant turn over it was high pressure hose and wash it all out.. genius really.

most of my guys in the lower end stuff  have older homes that have hard woods under the carpet they rip carpet out and just paint the hard wood.. some will stain.. those are much easier to care for they have character when you have flaws in them.

others I know that have carpet instead of replacing they just dye them a darker color to match the stains. until the carpet ends up very dark brown..

you simply can't compare your SF  high rentals to rentals in other markets you know that you wen through it in PHX..   But Generally speaking this is not how most 100k rentals in INdy go..

but I don't care where it is.. in those markets that are full or dominated with renters in SFR's compared to west coast.. the houses get lived in harder.. and @Ciprian L. is correct these folks being life long renters many times will move every year.. from one they just abused to a brand new one.. they don't have any lates on rent so their credit is good.. and pM qualifies them.

A hidden benefit of laminate flooring sometimes is that it can be cold, because it may cause tenants to put down rugs, thereby further protecting your flooring.

Your turn over costs are very high.  From what I read on this board, OOS turn key investors are getting hosed. Caveat Emptor.

Your PM is charging a premium over and above what the painters and flooring contractors are charging.  Also, with OOS properties managed by a PM, there is no incentive to economize.  For example, there is no incentive to do a fast and quick touch up paint over charging for repainting an entire room -- in fact this may not even be possible if no one kept records of the brand/color and finish of the original paint.    There is no incentive for the PM to inspect the properties (and charge tenants for damage ) mid tenancy.   There is no incentive for the PM to walk through with a can of spackle and do the "minor drywall repair" themselves.

My husband and I self manage class B apartments.  We do our own painting, fix drywall holes ourselves, repair our own closet doors, and replace kicked in door jambs.  None of this is rocket science  -- it is a fairly limited skill set, with a fast learning curve.    We can turnover an apartment quickly and cheaply.  We solved the trash out problem by presenting a written list to tenants at move in what we charge for dump runs, cleaning refrigerators and oven, etc.  Does your PM do this?  

Are you having your PM send you a video inspection every 6 months? 

For $8400, I would fly out there with a sleeping bag and my Home Depot card, rent a pick up and get to work.  

Sounds like the PM is in the business of renovating rather than managing your properties.  They need to screen better and I prefer luxury vinyl plank flooring.  It may cost more initially than carpet, but they last longer and hold up to water better than laminate flooring.  I have more stress over the lower cost out of state rental than the ones that I manage locally in CA.  It is just much easier to schedule an annual or six month inspection and checkup on your tenants than what your property management team is probably doing in Indy (cashing checks).  They need to be conducting inspections and providing photos.  You never know if you are going to get hosed on the repairs unless you are local and can get bids to compare.  People make out of state investing seem like the magical unicorn of investing, but from my experience, it just caused more headaches and stress than just making it work locally. 

@Bettina F.   Love it ... small rental portfolios have always been the province of mom and pop do it yourselfers like you describe its only been the last 2 decades that this phenom of buying property like your  a hedge fund  one at a time for small investors has popped up.. with mixed results of course.

I know my friends that own apartments they have turn over companies that can turn an apartment in day... paint a bed room 75 bucks flat fee that kind of thing.

but these SFRs are much tougher to deal with than apartment units.. Especially the bigger older homes..

in Some markets your talking a 2k sq ft home built in the 20 or 30s that in great areas of the west coast would cost about a million dollars... but when they are worth 1/10-th of replacement value on the open market that's where all this gets dicey.

PM's many times will do all the inspection stuff you desire but they have to charge for it and most owners don't want to pay the extra for those services.. remember PMs don't make much money as it is.. this is not like having 20 doors in one location.. and very easy to do what you describe.. 20 houses could take two to three days of drive time to go look at get appointments and then inspect.

take a company with say 1000 houses .. how would they do that.. they would have to inspect 3 houses every single day of the year... simply not enough money or man power in the way PM is set up currently in the US>

@Jacob Brattain What do you think about 46239 area, what type or neighborhood it is? 

@Bettina F. It's much easier when you manage your own properties, you can talk with the tenant and see when he is not happy and maybe you can help him and make it stay longer. With PM you find out about maintenance issues only when you get a statement and see some charges, unless it something bigger than maybe 300-400 they don't ask for your opinion.

On this property, in November the PM sent me an email that we have to file for eviction because the tenant doesn't want to pay the rent, his lease was expiring on December 31. ( I already went thru 3 eviction over the years in Indy, one of them costing me over 20k, I didn't want to have another one especially around that time of the year). I called the PM to get more info. The tenant payed the rent on time but the check bounced back, so the PM charged him for bounce back fee and also late fee and the tenant refused to pay the rent and the feed. I told the PM to waive the late fee and the tenant payed the rent for November and December, and he moved out at the end of the lease. If we would have filed for eviction probably we would not have gotten the rent for the last 2 months and the property would be in much worst condition.

The PM doesn't care about your property the way you do, for them is just another property from the hundred that they manage.

@Aron D. "I have more stress over the lower cost out of state rental than the ones that I manage locally in CA", same for me, I have been thinking to sell the out of state properties one by one when they become vacant for the last 2 years but for some reason they always get vacant in the winter. 

Last year looked like a good year for my out of state properties after just braking even in the previous 3 years, then on January 2 I got the quote and I'm thinking of selling again. Probably I will rehab it and sell it.

Originally posted by :

Probably I will rehab it and sell it. 

 Good luck trying to sell.  I rehabbed mine and have it on the market for the past year with no offers.  It is easy to get in at low prices, but hard to get out.  My only options are to sell it to another investor and lose money, owner finance, or keep it rented.  I hate that I tried to chase the carrot trying to think investing in a real estate note would be easy and stress free, but I would rather take investing in my own backyard and controlling costs/screening tenants.  I am sure there are reputable operators that provide a good service to out of state investors, but more likely than not, they look out for their own interests.

@Aron D. for all these reasons is why our performing 1st trust deed investments have waiting lists.. no tenant no toilets no issues.. be the bank.. but only bank those that are experts in these areas.. or one that has at least 50% cash into the deal.. make your 9 to 10% COC with never missing a payment and not having all these head aches.

I know most think rental income.. but after years of that note investing looks good.. but again note investing needs to be done right too.. other wise you will have the same stories.. IE

Oh I invested in this note and it went bad.. LOL.. so really it all comes down to understanding the whole process.

I too sold all my rentals this year.. and its a huge hit to me financially.. when you buy in an area that does not appreciate and you have to pay recapture when you sell.. its a huge hit.. no way no how you can make money..

the only way you do is you have to go into these long term as in forever ( and that is plenty of peoples goal) and you have to scale up.. I will have almost 250k of recapture to pay this year.. OUCH.

The properties in the area are higher in price than what I paid for it. I'm thinking of doing a 1031 exchange, but I cannot find something local right now, and probably have to put some more money from my pocket for down payment, even if I find something that makes sense.

I'm thinking of a few options: 

1) buy 2 out of state properties for each one that I sell, doubling the number of rentals and find a better local team, maybe partnering with some local investor (not to happy about this option because I don't like OOS investing, but probably the only option if I don't want to pay the tax).

2) sell, pay the tax and invest in notes until I can find some rentals in my area.

Are there any other options that I didn't think about?

@Ciprian L.   I came to the same conclusion.. but for different reasons I had a 30 year run at this stuff.. and well since my properties did not go up.. and I had to depreciate them by the time I paid to remodel them a little bit to get them sellable and pay sales costs.. I lost actual principal form when I bought them years ago.. and now I have all this recapture..

and because if was a little over 1.5 million in debt I would have to replace.. and I am retiring form rentals I just did not want to 1031 so I would have to come up with the down payment to buy anything.. that would have been 500k or so..  so at the end of the day just take the tax hit.. call it a day and move on.

but now that I have gone cradle to grave on this stuff.. appreciation matters more than one can imagine and or you need to hold them to the bitter end.. or suffer the recapture payment.

Or if you have a manageable 1031 and extra cash that's an option. My stuff was new construction in 05 06 so the good news is I paid little cap ex.. although it caught up with me when I had to sell.. LOL  nothing major but 4 to 10k per house.

and mine all sold to homeowners so I got full retail I shudder to think of what would happen if I had to sell them to investors.. OUCH.

This is the reality of dealing in low income neighborhoods. People are typically sucked in with the returns on paper, but the real life returns are often much lower.

In my opinion, the only way low income rentals can work is if the owner is very hands on and local to the property. For some people that is the sacrifice they are willing to make to get higher cash flow. To try and achieve that same cash flow with properties like this when you are out of state is very difficult.

We've found good luck with going with vinly plank flooring, we originally were all in on carpet because it is so much cheaper and we could pass those savings on to our Investors. recently we have made the switch after a few scenarios not nearly as bad as you described, but shouldn't have to replace carpet after 2 years even. I had the same carpet in my bachelor pad for 8 years and we were really hard on it. : ) It holds up 5x better then carpet, and doesn't bubble up and rip easily like laminate. Cost wise it's probably double carpet, but over the long haul, the CapEx savings is worth it. We want to do what's best for our investors long term, so it increases their acquisition price but relieves stroking a check every couple years for new carpet. If you would like a couple sources we use PM me.

@Jay Hinrichs mine are from 06 and 07, no much cap ex expenses, Cap ex expenses are much lower than tenant damage in my case. At least you can budget for cap ex, tenant damage and maintenance it's much harder. 

All this rental calculators are misleading, you can not calculate maintenance relative to rent amount. A 3/2 SFR that rents for $1,000/month and is 2000 sf, it will have more maintenance cost than a 1/1 condo that rents for $2,000 and is 500-600 sf. If you use the calculator with 10% maintenance you will allocate $100/ month for 3/2 SFR and $200/month for the condo. That's why every new investor from expensive places like California, NY, ... start investing out of state because there seams like none of the local deals make sense. The numbers don't work because you use the wrong numbers for that area.

If you have a lot of money and can afford to buy a lot of out of state property and build a good local team probably it can be done, but if your plan is to buy 1 a year you have to rely on luck.

@Michael Noto these are not a low income rentals for Indy.

@Jack Gibson thanks for the advice.

Can you please explain how someone is refinishing laminate flooring? I didn’t know it was possible. 

Originally posted by @Eike Maas :

@Ciprian L. , I agree with @Aaron Klatt 's idea of using laminate for the floors and making your rental dirt-proof. Laminate should have around the same installed cost as carpet, and can be used pretty effectively in wet areas like kitchens and baths, so you don't have to worry about replacing peeled/bubbled sheet vinyl or linoleum either. It's also super easy to clean,  pretty scratch/dent resistant, and can usually be refinished once or twice depending on the quality. LVT is also a great upgrade.

Consider this: Laminate is about $5/sf installed, and can be refinished for about $3/sf by stripping and reapplying finish (no sanding). Given it's durable, you might refinish every 5 years. Places like Lumber Liquidators usually have deals-of-the-week for $1 or $2 per square foot.

For a 1000sf rental, your average annual capex for flooring over the 9-year lifecycle of the floor is ($5,000 + $3000)/9 = $889 per year.

A nice wood laminate might even help you bump up the rent and get better tenants.

Originally posted by @Ryan K.:
Can you please explain how someone is refinishing laminate flooring? I didn’t know it was possible. 

It's possible to refinish laminate by stripping the finish off of the surface and re-applying finish - sometimes this is done chemically, but it can also be done w/ fine mesh screen. I would have a pro do it, unless you feel comfortable dealing with the dust and chemicals. You can't take out deep scratches, but you can fix some surface staining and light abrasion, like you might see in a kitchen or under dining chairs.

Engineered wood floors are also an alternative, and the nicer ones have a thick top veneer than can be sanded and refinished like a traditional hardwood floor. Engineered woods typically cost a little more than lam, but you can get more life out of them, and if you find good deals they can be fairly economical.

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