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Reduce Tenant Turnover to Keep Cash Flowing

Reduce tenant turnover

Rental real estate is booming, and as we know, it’s an enduring asset with the potential to create wealth for a lifetime. But successful investing in income property depends on keeping cash flowing from rents – and that in turn depends on keeping reliable and stable tenants in those properties.

Tenant turnover is one of the main reasons that an investment property fails to produce a return. Rentals that stay vacant for long periods are a landlord’s nightmare. Mortgage payments that are normally covered by rents must still be paid, and the investor faces additional expenses from refurbishing the property to be rented again, as well as the costs of advertising and screening new applicants. If the process stretches on for months, the investment can face serious losses.

It’s possible to insure rental properties against periods of vacancy, and some tax write offs are allowed for that as well. But although some tenant turnover is inevitable, the best scenario is obviously to avoid frequent turnover in the first place.

Tenants leave rentals for many reasons, not all of which have anything to do with the property or the landlord. Job changes and life circumstances force people to move, and those are outside a landlord’s control. But tenants also leave for reasons related to the rental situation itself, and those things are largely within a landlord’s power to change. They include:

Dissatisfaction with the condition of the property

If the landlord/investor doesn’t provide the promised upkeep on the property, tenants may find others who will. That includes services such as lawn maintenance and general refurbishing such as paint and minor repairs. That’s especially true if the target tenant is upscale or the property is in a more desirable area.

Failure to respond to tenant requests

Landlords who don’t respond promptly to tenants’ requests for repairs or maintenance, or to address other kinds of problems with the property or the neighborhood risk losing good tenants. Those requests don’t have to include unreasonable demands that don’t pertain to the safety and security of the property, though – such as a tenant who leaves in a huff because you haven’t put in a basketball hoop for his son.

Feeling unsafe

Tenants who don’t feel safe or secure won’t stay. Criminal activity on or near the premises, unsafe conditions on the property and a landlord who’s indifferent to their concerns are some reasons tenants may decide to leave an otherwise very desirable place to live.

Problems in the landlord-tenant relationship

Landlord-tenant issues are so common that there’s a whole branch of law devoted to them – and they’re responsible for the bulk of lawsuits related to landlord-tenant problems.

Those problems include landlords or their managers who fail to give notice before entering the property, use their access to snoop into a tenant’s belongings, or use their power as property owner to make unreasonable demands.

Landlords who see themselves as a tenant’s friend may make a renter uncomfortable or pressured – and if there’s a problem that calls for that “friend’ to enforce authority as owner of the property, the resulting friction can create a vacancy,

Of course, there are circumstances when a vacant property is better than dealing with a bad tenant in it – and that’s when eviction by the law can be the best outcome. But landlord/investors can take steps to reduce the likelihood of facing a long-term vacancy.

Screen tenants carefully

Ideally you should have a clear picture of the kind of tenant you’re looking for — as long as you don’t violate the tenets of the Fair Housing Act. A thorough credit and reference check should reveal any red flags that might lead to problems later, such as missing or late rent checks or the possibility of damage to the property. Wise screening can weed out potential problem tenants – and find the ones likely to stay.

Keep the property in top shape

Landlord tenant law experts point out that it’s important to keep the property in good condition – the condition tenants expect to see. If you’re trying to attract and keep an upscale tenant who can pay a higher rent, it pays to maintain the property with those goals in mind.

And in any case, taking care of general maintenance issues and addressing small repairs before a tenant requests it can go a long way toward showing renters that they’re valuable and that you care about their comfort and welfare.

Respond fast to tenant concerns

Prompt and courteous responses to tenant issues can go a long way toward keeping those tenants around. Dealing quickly with maintenance issues and working fairly and honestly with tenants on bigger issues validates their concerns and assures them that their welfare is important to you.

Some problems may not be solved fast – or simply. But it’s important to explain the situation and outline the steps that you’ll be taking to address the situation. Some fixes may not be cheap – but costs may need to be balanced against the cost of losing a stable, well-paying tenant.

Build bridges and maintain relationships

You don’t’ have to be the “friend who collects the rent” to keep a professional and responsive relationship with your tenants. Tenant law experts advise proactive landlords to keep connected with tenants after they move in with a holiday card or occasional check in to see if everything is doing well. And of course, paying prompt and respectful attention to tenants’ concerns helps to keep the relationship humming.

Landlords can also reward good tenants with a bonus or special perk for being a good, long-term tenant with gifts such as a month’s “rent vacation” or a reward for referring another renter. Small considerations like this go beyond the landlord tenant relationship and ripple into the community – and the larger pool of potential renters.

As Jason Hartman says, everyone needs a place to live, so why not let them rent it from you? Although some vacancy situations can’t be avoided, with forethought and consideration, you’ll be able to keep those good tenants renting – and your income flowing. (Featured image: Flickr/donwood)

Read more from Heroic Investing:

5 Things Landlords Must Know About Fair Housing

Learn Investing in a Weekend

Carla and the Heroic Investing Team

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