One of the main aims of property management should be to retain tenants, as that improves profitability considerably. When tenants stay longer, unit turnover is less, which means impressive savings on turnover costs. Doing everything possible to retain tenants is a fantastic strategy; however, this does not mean you need to keep the bad ones.
Time & Money
Turnover costs can add up, which can reduce profits to quite an extent. Even for a single unit the turnover costs are considerable even when the new tenant is moving in the next day. When tenants give notice about moving, property management has to start advertising, take calls of prospective tenants, show the unit, conduct background checks, draft a new lease, and collect security deposit. All this takes time and money, and if you are relying on estate agents to get new tenants, you will end up paying about a month’s rent as commission.
The Costs Add Up
Apart from these costs, property manager will have to inspect the unit before the departure of the tenant, and will have to prepare a schedule for repairs, painting, and cleaning the unit. The old tenant’s security deposit will have to be finalized depending on the damages done to the unit. When the new tenant moves in, the property manager will have to document the condition of the unit, coordinate the changeover of utilities, and take any further repair requests from the new tenant. All this work will take several days, which is a big drain on resources and manpower.
According to many surveys, the main reason for higher turnover is poor property management that is not attentive to issues of tenants. The main complaints will be not repairing things on time or poor maintenance of the property. When you consider the costs involved in properly maintaining the units and doing repairs on time, they will work out, much less than what you would be spending due to higher turnover of tenants. Therefore, it is good policy to keep existing tenants happy as much as possible, and to keep the property in decent shape.
A Negative Reputation
Profits will increase with longer retention of tenants, since turnover costs go down. Secondly, you do not want frustrated tenants terminating their lease and moving to other properties. The news of bad property management will spread quite fast through social media and by word of mouth. This will make it more difficult for property management to find new tenants, and vacancy rate can increase dramatically, leading to further losses.
Considering the added costs and the loss of reputation, it is far better to have a respectable and standout property management that is able to satisfy tenants and speedily take care of their issues. Satisfied tenants will not only stay longer, but even when they move, they will have something positive to say about the property.
Judicious property management has far reaching effects in not only improving profitability, but in also building good reputation and sustaining good tenants. Hence, the focus of property management should be a cost effective approach that pays striking dividends in the end, rather than short-term savings.