With summer upon us, landlords and property managers prepare for a vast influx of rental turnovers. In the United States, it’s estimated that over 80% of rental turnovers occur during the months of May through September, and can be a stressful and even costly time of year for investors.
As a landlord, your goal is to find and maintain high-quality tenants to reduce rental turnover and minimize vacancy rates. In the residential real estate rental market, higher average tenant rental lengths equate to higher ROIs and maximized profits, which is why so many landlords work tirelessly to enhance retention rates. While finding ideal tenants is not always guaranteed, there are ways to optimize your rental business and reduce rental turnover.
In this article, we’ll break down property turnover, its meaning, what a good rental turnover rate is, and why it’s important. Then, we’ll provide tips to reduce rental turnover and enhance tenant retention rates.
As a landlord, your goal is to find and maintain high-quality tenants to reduce rental turnover and minimize vacancy rates. In the residential real estate rental market, higher average tenant rental lengths equate to higher ROIs and maximized profits, which is why so many landlords work tirelessly to enhance retention rates. While finding ideal tenants is not always guaranteed, there are ways to optimize your rental business and reduce rental turnover.
In this article, we’ll break down property turnover, its meaning, what a good rental turnover rate is, and why it’s important. Then, we’ll provide tips to reduce rental turnover and enhance tenant retention rates.
Property Turnover Meaning
In the real estate rental industry, property turnover, or rental turnover refers to the period when a unit is vacant between one tenant moving out and a new one moving in. While property turnover is a normal part of rental investing, investors looking to generate recurring, passive income through rental investment properties must aim to minimize rental turnover rates as much as possible.
What is a Good Rental Turnover Rate?
The best way to track and determine if you have a good rental turnover rate is to compare your rate to the industry average. According to RealPage, the average rental turnover rate in 2024 was 46%. While rental turnover rates are still nearly 50%, this number is down from 48.8% in 2018, as more and more landlords have begun to focus heavily on resident satisfaction.
Rental Turnover Formula
To calculate your own rental turnover rate, simply use the following formula:
Rental Turnover Rate Formula
Number of residents who moved out in the year / Total number of residents x 100 = Rental Turnover Rate
For example, if you had 10 residents move out in 2024 out of a total of 25 total residents, your average turnover rate would be 40% (10 / 25 x 100 = 40).
Why a Low Retention Rate is Important
Ultimately, a lower rental turnover rate equates to a higher return on investment for investors. When tenants stay in your rental properties, you maintain a consistent income that covers mortgage payments, property management fees (Should I Hire a Property Manager?), repairs, and other rental costs.
Conversely, higher vacancy rates cut off cash flows and leave investors paying out of pocket for various tasks associated with turnovers, including:
Conversely, higher vacancy rates cut off cash flows and leave investors paying out of pocket for various tasks associated with turnovers, including:
- Move-out inspections
- Maintenance & repairs to get the property rent-ready
- Marketing
- Application processes & tenant screenings
These costs can quickly add up. Additionally, if you’re dealing with multiple vacancies for long periods of time, you can be signing up for both an emotional and financially stressful investment endeavor.
5 Tips for Reducing Rental Turnover & Increasing Tenant Retention
At the end of the day, rental businesses with a lower rental turnover tend to succeed. That is why CIVIC has provided a list of 6 tips for reducing rental turnover and increasing your tenant retention rate:
Thorough Screenings
Establishing thorough tenant screenings is the first step in enhancing tenant retention and reducing turnover. A well-rounded tenant screening and assessment process helps landlords find quality tenants that are more likely to pay their rent on time and remain at the property for a longer duration.
Previous landlords can offer a wealth of insights into potential tenants and whether or not they will be a good fit for your property. So, it’s important to obtain a history of your applicant’s previous residences with the contact information for past landlords or property managers.
Also, during the tenant screening, it’s important to include questions that allow you to acquire as much information about potential tenants as possible. In your application, include questions like:
Previous landlords can offer a wealth of insights into potential tenants and whether or not they will be a good fit for your property. So, it’s important to obtain a history of your applicant’s previous residences with the contact information for past landlords or property managers.
Also, during the tenant screening, it’s important to include questions that allow you to acquire as much information about potential tenants as possible. In your application, include questions like:
- Have you ever missed or been delinquent on a payment?
- What was your monthly rate at your previous residence?
- Were there any issues with your landlords or neighbors during previous stays?
- What was your reason for leaving?
Prioritize Maintenance
One of the most cliché complaints about landlords is their lack of caring or inability to fix common maintenance issues. Don’t give your tenants a reason to feel overlooked or underappreciated, and be proactive when it comes to maintenance processes. Prompt, on-time maintenance repairs are one way to keep tenants satisfied and reduce rental turnover rates.
Keep Rate Increases Fair
To maintain favorable profit margins and stay competitive in the market, landlords are required to increase rental rates. While it’s part of the process, overly aggressive rental rate increases can make current (and potential) tenants run for the hills!
Rather than simply increasing rates at each lease renewal, do adequate market research to identify reasonable rate increases, and have stats to justify your new prices. The goal is to remain in the green while keeping rental rates under local market rent averages. In doing so, you give tenants peace of mind, knowing why these rental costs are taking effect.
Rather than simply increasing rates at each lease renewal, do adequate market research to identify reasonable rate increases, and have stats to justify your new prices. The goal is to remain in the green while keeping rental rates under local market rent averages. In doing so, you give tenants peace of mind, knowing why these rental costs are taking effect.
Offer Lease Renewal Incentives
In most cases, at the end of a lease, you want your tenant to renew and remain in your rental property. One way to encourage current tenants to stay and reduce rental turnover is by offering lease renewal incentives, including:
- Rental discounts
- Free unit upgrades
- Enhanced amenities or services
- Flexible lease terms
Include a Tenant Replacement Fee
A tenant replacement fee has become standard practice in today’s rental markets. It is a contractually agreed-upon charge by the landlord to the tenants to cover the costs of finding a replacement tenant in case a lease is broken. This fee typically covers all administrative costs, including:
- Move-out costs
- Application processes
- Background checks
- Marketing
Finding Success in Today’s Rental Real Estate Markets
With today’s constantly evolving rental regulations, reducing rental turnover rates is one way to simplify rental processes and guarantee a successful rental business.
Ensuring tenant satisfaction and boosting retention rates is easier with adequate and reliable financial backing. CIVIC has been providing landlord investors with flexible and reliable capital backing for over a decade.
If you’re ready to enhance your rental business, minimize rental turnover, and keep your tenants happy, it’s time you worked with one of the best private real estate lenders on the market.
Learn more about our rental loan and rental portfolio financing options. CLICK HERE to schedule a FREE consultation with a CIVIC expert today.
Ensuring tenant satisfaction and boosting retention rates is easier with adequate and reliable financial backing. CIVIC has been providing landlord investors with flexible and reliable capital backing for over a decade.
If you’re ready to enhance your rental business, minimize rental turnover, and keep your tenants happy, it’s time you worked with one of the best private real estate lenders on the market.
Learn more about our rental loan and rental portfolio financing options. CLICK HERE to schedule a FREE consultation with a CIVIC expert today.
Authored by Bianca Montalvo
SEO copywriter and strategist
