Turnover rate refers to the frequency at which rental units within a property become vacant and are subsequently occupied by new tenants. It’s a critical metric for property owners and managers to track as it directly impacts financial performance. A high turnover rate can be costly, involving expenses like advertising, cleaning, and potential property upgrades between tenants, leading to income gaps. Conversely, a low turnover rate indicates tenant satisfaction, consistent rental income, and reduced vacancy-related costs. Property managers strive to keep turnover rates low by providing excellent service, timely maintenance, and fair lease terms to retain tenants and optimize property profitability.

How is Turnover Rate calculated?

Turnover rate is calculated by dividing the number of vacant units by the total number of units in a property, and then multiplying by 100 to express it as a percentage. The formula is as follows:

Formula: Turnover Rate = (Number of Vacant Units / Total Number of Units) * 100

For example, if a residential apartment building has 50 units and 5 of them are currently vacant, the turnover rate would be calculated as follows:

Turnover Rate = (5 vacant units / 50 total units) * 100 = 10%

This means that in this property, 10% of the units are currently vacant and in the process of being turned over or filled by new tenants.

Ways to Keep Turnover Rates Low

A lower turnover rate is generally preferred as it indicates higher tenant retention and more stable rental income. As such, property managers employ measures to ensure tenant satisfaction and tenant retention. Here are some examples of tenant retention strategies, ensuring turnover rates remain low.

  • Excellent Customer Service: Provide responsive communication and address tenant concerns promptly to enhance satisfaction.
  • Regular Maintenance: Keep the property well-maintained to ensure tenant comfort and reduce the likelihood of move-outs due to unresolved issues.
  • Competitive Pricing: Offer competitive rental rates to retain tenants who may consider leaving for lower-cost options.
  • Lease Flexibility: Consider flexible lease terms to accommodate tenant needs, such as month-to-month options or longer-term leases.
  • Renewal Incentives: Offer lease renewal incentives like rent discounts or upgrades to encourage tenants to stay.
  • Tenant Screening: Thoroughly screen tenants to ensure a good fit and reduce the risk of problematic renters.
  • Community Building: Foster a sense of community through social events or shared amenities to increase tenant attachment to the property.

By implementing these measures, property managers can reduce turnover rates, increase tenant satisfaction, and ultimately maintain more stable rental income.