Why are your tenants moving? If as a landlord you have never asked yourself that question, you need to. It is an important one to ask. Finding answers to why your tenants are moving will improve your business, your cash flow and your quality of life.
Some Stats
Don Beck, a master landlord, stated in a presentation that the average length of a tenant stay is 3 to 4 years. Three to 4 years is not really very long in the overall scheme of things. Beck continued by stating that 80% of tenants will move to someplace within a 7 mile radius of their current rental. Plus, 85% of tenants who move will end up paying more than they were paying you.
So many tenants move frequently, not far from where they currently live and end up paying more rent.
A Cash Flow Killer
As landlords, we have to ask ourselves why we could not keep these tenants. Most of them do not move out of the locale and they decided to pay more in rent. Why did they leave us and pay someone else more? Why could I not somehow capture that?
Analyzing why your tenants move is important to us because tenant turnover is a cash flow killer. Not only does your unit become vacant, which translates into lost rental income, but think of all of the other expenses and time involved. There are advertising expenses and there is time spent on showings. Rehabs and repairs must be done. It all can end up being very expensive and crimping your bottom line. Especially if you have a lot of turnover. Trying to figure out why your tenants move is no different from other businesses trying to figure out why customers do not come back.
Why Tenants Move
Tenants move for a variety of reasons. Some of which are out of your control. They may take a new out of town job or may want to be closer to family. But if 80% move within 7 miles of their current homes, these factors only account for a few tenants. In my experience, it is much more likely for people to move due to changing family conditions. Children come along and parents move to attend certain schools. Getting married, divorced and other significant life changes also likely account for many local moves.
Like I said, we may not be able to help some of these moves. There is little we can do if we are not in the right school district or someone gets hit by Cupid’s arrow. But, many tenants move to separate themselves from their current home or landlord and these are likely reasons we can tackle to reduce tenant turnover.
Ask Them
To find out why they are moving, you have to ask them. Otherwise you will never know. Make this question a part of your move out process. You can ask directly, by e-mail or as a part of your move-out checklist. By asking, you may find that there was not much you could do. But you may also find that there was.
What if a tenant gets a raise and wants to move into a “nicer” place? Could you perhaps offer to upgrade an appliance or redo a bathroom? Sure there would be some costs involved but you may have to do these things anyway if the tenant leaves. Plus, think of the cash flow you keep if the tenant stays a couple more years.
What if your tenants say they are leaving because things never seem to get repaired? Some tenants are surly never satisfied and we are actually happy to see those tenants go. But if you find this response is repeated over and over, then you need to take a hard look at what you are doing. That money you think you are saving is actually costing you in the long run.
We landlords have to also remember that we are providing a service – housing. We are asking our tenants to part with their hard earned income in exchange for that service. This process can be difficult to manage. But, we cannot ignore our tenants or think that hearing nothing means all is OK. Instead, periodic contact through inspections or even e-mail helps significantly and can make tenants feel more appreciated.
Think About Where You Invest
Some markets foster tenant stability more than others. School districts are an example as parents will be reluctant to pull their kids from the school. Areas near employment centers may also see a steady stream of tenants who wish to remain close to their jobs.
On the other hand trendy and hip areas, while attracting a steady stream of good applicants, are often prone to higher turnover. Why? Folks who live in trendy areas are often younger and in that stage of life when things change. Jobs change. People get married. They have children. All of which are likely to cause a move.
We can never really know all of the subjective reasons why our tenants move, but we should at least as entrepreneurs and business people try to anticipate why tenants are moving and determine if there is something we can do to reduce it. It just pays to do so.
Kevin Perk is the founder and publisher of Smarterlandlording.com. He is the author of Advice From Experience To New Real Estate Investors. Subscribe to Smarterlandlording here. Contact Kevin here.
