In the property management business, tenant turnover is nearly as certain as property tax bills. And like taxes, it too can be expensive. So when we crunched our numbers on turnover periods recently, we were surprised at how much variation we found between property management companies. We dug deeper to find the cause.
First, let’s clarify something. When we say turnover period, we’re starting on the date of the departing tenant’s move-out inspection, when a property is examined and any damage and necessary repairs are identified. This period then ends on the date of the property’s final quality inspection, when the repairs have been completed and the unit is declared ready for rent.
Swift or sluggish with little room between
In 45% of the property management companies we studied, the average turnover period lasted less than nine days. The largest segment within this group completed their turnover within five and seven days, with 31% of the turnovers taking less than seven days. Not too shabby, we’d say.
On the flip side, turnover periods for 49% of the companies studied lasted nine days or longer, with 35% of those companies taking 13 days or longer. In general, if a company missed the nine-day mark, it was a good bet they’d take two weeks or longer to complete the turnover.
Overall, companies were either agile, turning over a property within seven days (31%), or sluggish, taking more than two weeks between the move-out inspection and final, “rent-ready” inspection (35%).
What of the remaining 6%, you ask? They reported having no clue as to how long their turnover periods last. Yikes. Perhaps more surprising, only 71% of property management companies reported even conducting a final quality inspection.
Discussion between investors and property managers the key determinant
When we analyzed what these companies accomplished during the turnover period, we began to understand why it seemed to be an all-or-nothing type of affair.
In 53% of the companies studied, they reported tackling the time-consuming task of replacing the carpet or floor. The majority of this work was done on multi-family properties but a surprising number of single-family homes also sided with replacing, rather than cleaning, the floors.
But the stat we believe gets to the heart of the discrepancy is subtle, simple and we think, rather telling.
Overall, 63% of property management companies reported having a discussion with their investor(s) about improving the property during the interim, be it general upgrades like replacing an old dishwasher or large-scale renovations like redoing the entire kitchen.
The kicker comes in the correlation between a company’s turnover period and the likelihood that they had some type of dialogue with their investor(s). In 73% of the companies whose turnover periods lasted longer than nine days, they reported having a discussion with their investor(s). Conversely, just 27% of companies that took less than nine days to complete a turnover reported having such a discussion.
Some companies ably produce quick turnover periods, getting an old tenant out the door and a new tenant in their place within 10 days. This reduces a property’s vacancy rate and keeps the cash flow churning.
Other companies prefer to use the respite to assess their property and discuss whether costly, time-sensitive repairs can be avoided with preventative work, or capital additions can improve the property — and potentially increase rent — with a bit of elbow grease in the interim.
There is no one-size-fits-all strategy. Each situation is unique. But with the right information, your company can make the right decision. That’s where we come in.