If you’ve been a landlord for long enough, you’ve inevitably had an experience where you have a good tenant — things seem to be going fine — and then they surprise you by not renewing their lease. Aside from being costly, these situations are confusing. What makes these tenants leave?
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6 Reasons Tenants Move on
Tenants fail to renew their leases for a number of reasons, but some are more common than others. Let’s discuss a few of these reasons:
1. Changes in Personal Situation
In many cases, a tenant’s personal situation may simply change. Maybe they’ve changed jobs, recently expanded their family, or are moving away to be close to a significant other. There’s nothing you can do about these highly personal situations, which often sneak up with very little warning.
2. An Expensive Rent Hike
Are you enacting an increase in rent? Even if it’s simply to keep up with the going rate, many tenants don’t like the idea of increasing a rent payment for the same property. For some reason, they’d rather switch properties and pay more. Psychologically, a new place seems to better justify the price increase.
If you absolutely have to raise rent, do so over time. Raising your rent by more than 10 percent is a surefire way to lose even your most loyal renters. If your rent is significantly below market value, tell your tenants. Then, gradually raise rent in increments each year. Raising rent 2–3 percent here and there will have a much less noticeable effect.
3. Poor Attention to Detail
Sometimes tenants simply get tired of dealing with your lack of attentiveness. While they understand that issues happen, they want to see you put forth the proper effort to correct them. For example, if the air conditioning goes out on a Friday afternoon in July, they want you to make as many calls as you can to get someone out there right away. Waiting until Monday and forcing them to suffer through the miserable heat won’t win you any bonus points.
4. Lack of Communication
This one goes hand-in-hand with the last point; lack of communication is a major cause for turnover. Not only do you have to communicate regularly with your tenants about things like maintenance, but you also need to speak with them about renewal well in advance to give them time to process things like rate increases or changes in lease terms.
5. Lack of Trust
What have you done to establish trust and rapport with your tenants? Do they feel like they can be upfront and honest with you? — Or do they sense that your only purpose is making money? Tenants want to be treated with transparency.
6. Problems With Neighbors
As we all know, bad neighbors can make for a miserable housing experience. Nobody wants loud, intrusive neighbors. If you have bad neighbors around, don’t be surprised when your tenants take a hike.
The Cost of Turnover
Experienced real estate investor Kevin Perk knows a thing or two about managing properties, so when he says that tenant turnover is the single biggest killer of cash flow, your ears ought to perk up.
“When talking about tenant turnover killing cash flow, I am talking about all of the processes and costs involved in moving a tenant out of an apartment, fixing it up, and moving another tenant in,” Perk says. These include administrative costs, advertising, showing the property, application costs, repair expenses, and, of course, lost income.
While you can’t retain 100 percent of your tenants, you can make sure you’re aware of the common causes of turnover so that you don’t do yourself a disservice.
What do you do to keep your tenants happy? Let me know in the comments section below!