Ways to Decrease Tenant Turnover

Decrease Tenant TurnoverHow to Get the most from your property by decreasing Tenant Turnover

With the flux in many of the Canadian real estate markets, managing and decreasing tenant turnover is at the forefront of many investors’ minds. In other words, tenant retention is key to your success as a real estate investor. Anyone can command a ship during good weather, but it is during the “storms” when one’s fortitude is most tested. The same philosophy applies in managing your investment real estate during market fluctuations.

The key factor for a successful investment rental property is having your property consistently rented to the right tenant/resident with a minimum of tenant turnover. The reason I refer to a tenant as a resident, at times, you can create a situation for your tenant that makes them feel like your property is their actual home; this is an significant shift in perspective – when a tenant views themselves as a resident rather than “just a renter”. How you treat your tenants and how they perceive you as a landlord has a lot to do with encouraging this shift in perspective. While it’s almost impossible to have zero tenant turnover, understanding the components of tenant turnover and the factors that influence and impact it will help you maximize your investment property’s performance.

Keeping good tenants and keeping them happy not only reduces your tenant turnover, but is also likely to reduce wear and tear on your rental property, improves income and lowers your expenses. But the reality is that tenants leave for a variety of reasons, many of which may be beyond your control. Tenants might move due to changes in their life circumstances – a new job, a growing family, purchasing their own home, the loss of a job, etc. – all of which are factors beyond your control as a rental property owner. However, they might also move due to factors within your control – a noisy environment, lack of storage space, lack of maintenance or upkeep of the property, rent increases beyond their capacity to pay, lack of communication regarding issues with the property, tardy response to requests for repairs, etc. I’ll discuss these factors in further detail later and I’ll provide practical suggestions as to what you can do to manage tenant turnover effectively.

If you experience vacancies, don’t panic, plan for it. The worst thing you can do, which is what most landlords do first, is drop the rent charged especially when you don’t know all the factors.

Know The Costs of Tenant Turnover

A good first step to decreasing tenant turnover is to understand the costs involved when a tenant turnover happens.

The real cost of tenant turnover:

  • Admin cost: If you own in a multifamily complex, there may be move-in/out fees to be paid to the condo/strata corporation and/or to property management if you have them managing your property. Depending on your management agreement, your property management company could also charge paperwork processing fees, photocopying, printing, fees, etc. While the individual item or action may not be expensive, things can add up if you have a number of tenant turnovers each year.
  • Marketing/Advertising: The costs of advertising for new tenants; even if you use Craigslist, Kijiji or a no-fee online similar service – it still “costs” you your time, and if you are trying to keep your rental ad at the top of the “For rent” list it will cost you some money. If the rental market for your property is slower, then you may need to consider going beyond online advertising to things such as ads, flyers or posters –and their production/printing costs.
  • Showing: Showing the property to perspective tenants will once again cost you in your time and effort, or the cost of a property management company or realtor fee for delivering that service for you, if you use such services.
  • Application processing: Once you identify a potential tenant, there are still costs involved (your time or actual fees charged by property management or third-party reporting companies) in completing the paperwork and checking references for the potential tenant.
  • Cleaning: At a minimum, the property will need a thorough cleaning between tenants and the attendant costs for that service.
  • Repairs: Turnover time also provides an opportunity to give your property a fresh coat of paint, or complete repairs or renovations to maintain or upgrade it.
  • Lost income: Any time beyond a 24-hour turnaround between monthly tenants will cost you rental income and in a slow market that can be a few weeks or even a month’s rental income loss.

Understanding the Impact of Market Conditions

The current market conditions can have significant impact on a rental property, particularly as they impact the availability of tenants, the regional vacancy rate, and the amount of rent that can be charged. Here are some items that influence or impact market conditions that should be kept in mind:

  • “Resource” regions/provinces/cities: As most of us are aware, the impact of a major drop in the price of a resource commodity can greatly impact the availability of tenants, as well as, their ability to pay rent or the amount they are willing to pay due to choice in the market.

The recent drop in oil and gas prices has affected market conditions to varying degrees in certain markets in Alberta and Saskatchewan, as well as some markets in northeast BC. A contraction in GDP typically leads to higher job loss, which in turn generally leads to higher vacancies in a particular region as workers move to other areas where there are jobs. Depending on the employment conditions, potential tenants who remain may be limited in the rental rates they are able to pay.

  • Regional issues – market absorption vs. housing construction: A higher market absorption rate means the supply of available homes is shrinking, which may result in more tenants available for your property. In contrast, a market that is experiencing an increase in housing construction, without an equivalent or comparable population increase, has a lower market absorption rate and usually results in a higher vacancy rate. This is due to an overabundance of available rental properties for the limited number of potential tenants. Here is an interesting interactive article comparing rental rate to mortgage rates and if it’s better to buy or rent in certain Canadian cities.
  • Pay attention to changing market conditions: Even if your property has a low vacancy rate, a wise real estate investor will monitor the market conditions that impact their rental property and make adjustments as required for new tenants or existing long term tenants.
  • Understand what is within your control vs. outside your control: There is little you can do as a property owner to affect regional or provincial market conditions, but focusing and acting upon things that are within your control, especially when there is a low vacancy rate in your market, will serve you well.

Items such as the curb appeal and the general condition of your property is critical, as your existing or potential tenant has more to choose from. It is desirable to have your property to be at the top of their mind for all the right reasons. Ensure that all appliances work properly, and everything is in good repair. Optimize the viewing experience for potential tenants – ensure that your property is putting its best foot forward.

Consider ways you can make your property more appealing: This could mean charging a lower rent, but there are many other things that might make your property appealing without reducing the rent charged. Look at the utilities that a tenant would usually pay for and consider providing a rebate for a specific period of time – this might include free WiFi, or off-setting an expected increase in utilities, etc. Consider the type of tenants that you want to attract and think about what might appeal to them.

At a recent Real Estate Investment Network meeting, Don Campbell mentioned an example that I thought was so creative. He suggested that if you are renting to a family and the market warrants some creativity, perhaps giving the family a $1,000 reduction in their annual rent to offset the phasing out the children fitness benefit in the recent Federal budget would be a welcome one-time benefit for that family. It would be about $96/month reduction, but you will have made a direct positive impact on the quality of their family’s life that they should remember; just be clear about what you’re doing and why, and that it is a one-time thing.

Be aware of the issues your tenants might face with budgeting in hard times. If you decide to raise the rent you charge, consider providing long term tenants a break by offering a rebate for a set period of time.

  • Acute vs. chronic problems: It’s also useful to consider whether a change in market conditions is acute or chronic. Acute changes in market conditions are short-term, with a defined end point – for example, the seasonal closure of a large employer in a town. Chronic changes are longer term and may not have a known end point – for example the unexpected or permanent closure of a primary employer. The way you manage your property will vary with whether a market change is acute or chronic.

This issue of acute vs. chronic problems can also apply to your property. For example, a chronic issue may be that the property is just old and deteriorating due to things that have not and are not being maintained. Another example could be that the property has poor insulation and is subject to drafts, which can make the place cold in the winter for tenants and also costs extra to maintain until you solve the issue.

An example of an acute problem could be an appliance breaks down or a water leak which can have a big impact, but can be fixed promptly.

  • Nurture your relationship with your tenants: Establish a good relationship from the start. Be friendly, but professional. You don’t need to be your tenants’ best friend, but you should actually care about them. If you have their best interests at heart, you’ll have your property’s best interest at heart. Keep your rent reasonable and priced at or even maybe slightly below fair market value if it is warranted, maintain the property and be responsive to tenant requests. Having the right tenants for your property, and for you as an owner, is fundamental to a good tenant/owner relationship and property performance.

3 key ways within your control to decrease tenant turnover

1. Proper tenant screening

A consistent tenant screening process is a valuable tool for an owner. Regardless of whether you’re making the decisions about your potential tenants directly or through a property management company, proper tenant screening is invaluable and key to getting the right tenant for your rental property:

  • Follow through on application information: Have a tenant application form in place and use it – every time. You’ll find examples of application forms online and via the residential tenancy office in your area.
  • Contact ALL references: Follow through on the information you’ve requested, but bear in mind that references will most likely be handpicked by the tenant.
  • Verify tenant identification is accurate: Check to ensure the information that you’ve been given is true and accurate.
  • Verify job, length of service: Speak with the tenant’s current employer to confirm this information.
  • Review a potential tenant’s current rental situation and past landlords: Ask for this type of information on your application form and follow-up on it. Try to obtain the contact info for the prior landlord to the one from which the tenant is leaving and contact them regarding your potential tenant.
  • Look at the vehicle: ensure that the potential tenant’s vehicle is consistent with the information provided. Does it look beat up and how is the interior? Is it full of stuff and messy?
  • Understand who will be your tenants: Make sure you know who and how many people are going to be renting and see everyone’s identification details. All adult tenants should be named in the rental agreement/lease.
  • Gut Check: Pay attention to your gut feeling about the tenant. There are cues that we often get at a gut level that can help if we are paying attention.

2. Create a proper and comprehensive Lease Agreement

Ensure that you have a proper lease that includes all the terms and conditions necessary for you and your property. If you’re using a standard lease go through it carefully and make any required adjustments before you provide the lease to your tenant.

It’s imperative to include:
  • A move in and move out inspection checklist and an agreement for the tenant to ensure condition of the property
  • A list all expectations of you and your potential tenant and have them sign it
    • Include the provision for regular inspections of the property by you or your property management company (and follow through on this opportunity)
  • The requirement for a security deposit
  • A user manual for your tenant for the property as a whole and for the operation, cleaning and maintenance of appliances specifically
  • Pet conditions
  • Include addenda where necessary

3. Treat your property like a business

As previously discussed, it’s good to have a friendly, but professional relationship with your tenant. Consider the management of your rental property as a business. Define expectations and establish a good relationship with your tenant from the start rather than waiting to initiate these tips for a successful relationship during a stressful situation or disagreement.

How to manage your landlord/tenant relationship successfully:

  • Maintain tenant relationships: this includes regular communication after they move in; it’s not necessary to be in touch all the time, but it is important that your tenants know you are involved in your property
  • Answer tenant requests promptly
  • Don’t wait to hear about issues be proactive and ask the tenant about any potential concerns they may have
  • Address maintenance issues completely and promptly
  • Handle complaints from your tenant or neighbours effectively
  • Consider providing a loyalty program – let your tenants know you appreciate them:
  • Acknowledge their consistent and on time payment of the rent – this could be as simple as a hand written thank you card once or twice a year
  • Recognize when they keep the property appealing both inside and out
  • Thank them for allowing for inspections as needed
  • Provide a welcome package that includes some bottled water and a few basic necessities in a basket, list of nearby amenities, parks, restaurants, health care, community centres, transit information, etc.
  • Consider sending them a birthday card (if you know their birth date, which should be on their application) or provide them something at Christmas (or another culturally-appropriate time) as a token of your appreciation
  • If they want to do an improvement to the property make sure that they are qualified and that you have a clear understanding/agreement, in writing, of what they wish to do and that you have signed off on it. Consider paying for the materials if it is a more permanent improvement or something like plants for flower beds or permanent planters.
  • Get everything in writing to avoid any misunderstandings – see also the discussion about leases above
  • Let them know protocol for the various aspects of living in the property, this may be handled via a user manual as mentioned above
  • Conduct regular inspections as per the terms and conditions of the lease or a separate signed expectations document (if such expectations weren’t included in the lease document):
  • Complete regular drive-by and/or more formal inspections –things to observe include, but not limited to the following:
    • Exterior in good repair
      • Roof
      • Gutters
      • Lawn
      • Sidewalks
      • Siding
      • Shrubs and tree – do they need trimming or pruning
      • Overall cleanliness of the exterior property
    • Interior in good repair
      • Check for functionality of all items: look for leaks or abnormal wear and tear
      • Leaking pipes or dripping taps
      • Noisy or faulty appliances
      • Lights, receptacle, or switches not working properly
      • Loose cabinets
      • Stains in ceiling or on walls
      • Look up and down in every room
      • Moisture and condensation

Reduce the cost of Tenant Turnover

You will have tenant turnover, but there are things you can do to effectively manage turnovers and reduce the costs. These items can be handled by you or can be part of your agreement if you use a property management company.

When you receive a tenant’s move out notice it is worth completing an exit interview to determine the reason for the tenancy termination. The information you gather can be extremely helpful in attracting the next tenant. The key thing, as mentioned at the beginning of this article, is that one shouldn’t panic when a tenant gives notice, but rather plan for tenant turnaround as a matter of routine.

  • Start marketing the property early: once you’ve received your current tenant’s notice, start looking for a new tenant. Don’t be dull; paint an attractive picture for the reader in your ads. Ideally, you’ll have a new tenant ready to move in as soon as the current one moves out.
  • Not everyone needs an in-person showing: pre-screen potential applicants, by phone, email or using an online form and utilizing basic screening questions to ensure the tenant is compatible with your property (for example, not a family with young children if your property is in an adult-oriented building). Only provide showings to serious applicants, try to arrange several appointments for an afternoon or evening rather than doing “one-off” showings. Consider holding an open house to show the property to multiple potential tenants at once.
  • Complete a move-out inspection: before your current tenant leaves the property set up an appointment to do a walk-through with your tenant, so that you can point out areas that need to be cleaned or fixed by your tenant. This also helps to confirm your expectations as to the condition you expect the property to be in when they leave. It’s also an opportunity for you to make note of any appliances that need to be repaired or replaced or other repairs or upgrades that you might wish to do while the property is vacant and between tenants. Check out these suggestions on how to help your tenants get their security deposit back. Then do a final move out inspection with the departing tenant when you are receiving the keys.
  • Streamline your processes: if you’re managing the turnover directly, consider using available online programs to help streamline turnover and new tenancy processes. There are a number of types of property management software available. If you utilize a property management company be sure you understand how they will manage tenant turnover on your behalf – be prepared to adjust your contract with them as required.

Even the best of tenants can move out eventually; being prepared and understanding the components and costs of tenant turnover will help you budget your expenses and manage the entire process more efficiently.


As mentioned at the beginning if this article tenant retention is key, but you will have vacancies from time to time and you need to have a plan in place. Managing tenant turnover effectively and determining your steps for reducing tenant turnover will help you maximize the performance of your rental property. Set up the processes to enable you to achieve these objectives from the start and when your property is doing well, so that should your property experience a down turn or “hard times” you are prepared. Have a business-like approach to the situation and a well-established relationship with your tenant.

Your tenant is your “golden goose” and if you want the golden goose to continue to lay golden eggs (rental income) then you need to take care of the goose. Neglect or anger the goose and it will go away (move) and take your rental income with it.

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