Rehab Costs and Tenant Turnover

11 Replies

I saw some numbers that I was not quite thrilled about, and I was wondering if anyone here would be willing to share what kind of numbers they are looking at in terms of rehab costs.

1. What was the purchase price? 

2. What is your average initial rehab cost when you purchase a property? 

3. What is the average rehab cost for tenant turnover?

Mine vary for 1 and 2

BUT 3 is usually 5-7K. You kinda need a tenant to stay in the property for 2yrs to make profit. 

agree you will make zero profit in midwest markets if a tenant leaves every year

Wow, 5-7k for a turnover? Are these C/D class properties that were treated poorly, and paying above-retail contractor rates to paint & fix holes? 

The only time I spent > 5k on a turnover was an eviction where the guy had trashed the place and used really dark paint all over the place, and his cat had peed everywhere so I had to refinish the floors. AND I had to go get all new appliances, AND he ran up my water bill intentionally.

What costs are going into this that 5-7k for a turnover is normal?

Originally posted by @Federico Gutierrez :

Mine vary for 1 and 2

BUT 3 is usually 5-7K. You kinda need a tenant to stay in the property for 2yrs to make profit. 

 Are the tenants using the plumbing in the basement as monkey bars or something? Are the repairs you are making necessary to market the property? Do you file lawsuits to recover damages, or do you just let the tenants get away with it?

Tenants are savages bro. They don't care, good luck getting money from these people if you put a judgement on them. You think a $800 deposit covers much? 

For example you tell them don't smoke they do it anyways I keep the deposit but then I have to repaint the whole place.

@James Galla I am a property manager, and take precautions to protect my investors from spending that kind of money on a turnover. I managed 350 student rentals for 2 years, and every single year 85% of my inventory needed turning over. I collected cleaning fees at the beginning of the tenancy ($350-$500, non-refundable, one time fee, I just asked tenants to broom clean at move out and sent in a professional cleaning service at move out). I took a full month's rent as their security deposit, and charged any smoke damage, nail holes, drywall damage, etc.. to the tenants. I use keyless Schlage deadbolts on all of my properties so my investors don't need to pay an annual re-key fee. If a tenant does damage beyond their security deposit, often I work out a payment plan with them or pass them along to a collections agency to recover the amount owed. As long as you have the right property manager, you should be able to be quite profitable with annual turnovers. 

As long as you are doing regular inspections (quarterly) and doing repairs immediately billed to the tenants turn over costs should usually not amount to any more than paint and minor repairs.

The key is never leave repairs till they move out, that is way too late. 

Managing your properties properly is the key to financial success. Ignore them and you pay th eprice every time. Hold tenants responsible.

5-7 k for a "average" turnover? way unless its got a lot of delayed maintenance or needs a rehab...and then the next turnover is minor stuff, so that average drops

So, is there any strategy that doesn't involve free lawyers or landlord insurance to offset that outrageous turnover cost? Do you all just absorb the cost and hope in the long run that things will be profitable?

Hope is not a business plan. Properly managing your properties, inspecting and holding tenants responsible avoides all "outrageous" costs. 

Turnover costs are going to be directly related to asset class. End of story. As the quality of the neighborhood goes down the costs & frequency to turn the unit over increases.

  • Cleveland
  • Toledo
  • Indy
  • Memphis
  • Atlanta
  • Dayton
  • (Insert any city here)

All the same stuff. Has always been this way, will always be this way. If you have properties with higher risk tenants paying low rents they do dumb stuff. Doesn't matter who your Property Manager is. Superman could be your Property Manager, tenants are still going to do dumb stuff. That's why these people are living in these high risk low quality neighborhoods, they do dumb stuff.

Anybody know where the people who don't do dumb stuff live? Better neighborhoods. There is no magical answer that will solve this problem for anyone. If there was we wouldn't have a varying degree of neighborhood quality in every major metropolitan area of the country.

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