When it comes to tenant turnover, understanding the type of tenants in your area and why they are moving is key. If they move frequently for work or employment, you can expect higher turnover rates. On the other hand, if they stay in the same place for a long time, you can expect lower turnover rates. Tenant turnover can be a major issue, as it leaves behind high costs and frustrations. Most leases are for 12 months, so you may face these issues once a year.
One of the most common reasons for tenant turnover is feeling unsafe or uncomfortable with their neighbor. This could be due to a neighbor who they think is a bad influence on their children, or because their property was recently robbed and they think someone from the house next door is the culprit. Feeling safe in your home and community is essential, which is why many people prefer to have neighbors who haven't been to prison. Rotation is a measure that defines whether a resident decides to renew their lease or move. The terms “rotation” and “retention”, although they are opposing concepts, are often used interchangeably. Low resident retention indicates high turnover and vice versa.
All things being equal, the rental portfolio of an asset with a high turnover will be amortized more frequently. However, this isn't necessarily a bad thing. Cost-conscious operators argue that resident turnover should be minimized whenever possible. Empty leased units represent a loss of income on the rental list. Managers who focus on revenue argue that the best way to achieve aggressive rent growth is through strategic and efficient billing.
The objective in this case is to increase rents sufficiently and, at the same time, to avoid a mass exodus by staggering maturities and maintaining sustainable capacity.
