Reducing Tenant Turnover: Why It Happens & How To Fix It

Key Takeaways

• High tenant turnover is costly: Frequent move-outs lead to lost rent and added expenses (marketing, repairs, cleaning, etc.) that eat into your profits. A turnover rate above 50% is a red flag for any landlord.
• Common reasons tenants leave: Bad neighbors, personal life changes (job loss, financial issues, marriage/baby, etc.), or dissatisfaction with property management are the top causes for non-renewal.
• Many turnover causes are preventable: By being responsive to maintenance requests, providing a safe community, and communicating clearly, landlords can address issues before tenants decide to move out.‍
• Leverage tools to improve retention: Excellent management is key to tenant satisfaction – and property management software can help by automating tasks, organizing information, and ensuring no tenant concern slips through the cracks.

It's no secret that the rental business is an excellent source of passive income. But if you're a smart and savvy real estate investor, you know there's more to it than just leaving it alone and cashing the checks. Your ultimate goal is to reduce tenant turnover by getting tenants to renew their leases and stay for the long term so that you can increase profits.

Smart rental property owners make it a point to reduce tenant turnover.

If you have more than a 50% average tenant turnover rate, this should immediately raise a red flag. This article talks about the hidden costs of tenant turnover, why your tenants don't renew, and how to fix it. Learn how you can reduce tenant turnover today so that you can squeeze more profit from your rental property.

Hidden Costs of Tenant Turnover

Whenever a rental unit goes vacant, your cash flow is disrupted. Not only do you lose rent for the time the unit is empty, but you also incur various expenses to find and secure a new tenant. Some turnover costs are obvious (like advertising and cleaning), but others are less apparent. 

Here’s a look at common costs that add up each time a tenant leaves:

Common Reasons Tenants Move Out (and What You Can Do)

Now that we’ve covered why tenant turnover is expensive, let’s talk about why tenants decide to move out in the first place. Remember, moving is a big deal for renters too – in fact, surveys show that six out of ten people rank moving as the most stressful life event (even more stressful than divorce!). If a tenant chooses not to renew their lease, there’s usually a significant reason behind it. Some reasons are beyond your control, while others are problems you can fix.

For quick reference, here’s an overview of the main reasons tenants leave and why:

Let’s break down each of these reasons in detail and discuss how you, as a landlord, can respond.

Bad Neighbors or Community Issues

Feeling unsafe or uncomfortable around their neighbor is one of the most common reasons for tenant turnover. They could have a neighbor they believe to be a bad influence on their child, or perhaps they recently had their property broken into, and they think the culprit to be someone next door. It's essential to feel safe in your home and, by extension, your community. This is why many people prefer to have neighbors that have not been to prison.

What you can do: While you can’t control everything about neighbors, you can screen tenants thoroughly to avoid “bad apples” in your property. Careful tenant screening helps ensure that each new renter will be a respectful, reliable neighbor to others. Here’s a quick checklist of steps for an effective screening process:

1. Rental application: Collect detailed info on the applicant’s history and references.
2. Credit check: Verify they have a record of paying bills on time and aren’t overloaded with debt.
3. Background check: Look for any criminal history or prior evictions that could signal trouble.
4. Prior landlord references: Contact previous landlords to ask about the applicant’s behavior and whether they paid rent reliably.
5. Employment verification: Confirm their current employment and income to ensure they can afford the rent.

Apart from these tenant screening reports, make sure you sit down with the new tenant for an interview. Ask them why they want to move to your area and get an idea of their lifestyle. Learn every possible detail that you can during tenant screening, so you can determine if they are quality tenants.

Personal Reasons (Life Changes)

Sometimes a tenant’s decision to leave has nothing to do with you, the property, or their neighbors—it’s simply personal circumstances. No matter how well you manage the rental, you may not be able to prevent a move-out if life throws a curveball at your tenant. Common personal reasons include:

• Financial strain or cost of living: Unexpected hardships (medical bills, car repairs, loss of income) or even a rent increase can make the current rent unaffordable. A tenant living paycheck-to-paycheck might have to move out if their finances get squeezed.
• Job relocation or employment change: If a tenant loses their job or gets transferred to a job in another city/state, they may have no choice but to relocate closer to work or find a cheaper place.‍
• Upsizing, downsizing, or life milestones: Positive life changes can also lead to moving. For example, a tenant might decide to buy a home, move to a bigger space for a growing family, move in with a partner, or seek a better neighborhood. These “better opportunity” moves aren’t about you or your property at all.

In cases of personal life changes, there’s often little a landlord can do to keep the tenant from leaving. However, it’s still valuable to maintain good relations. If you have other rental units, you might offer one that suits their new needs (for instance, a larger unit if they’re expanding their family). By being understanding and helpful, you increase the chance they might return to you in the future or refer new tenants your way.

Poor Property Management

If we're talking about reasons you can control as a landlord, property management is the first. Like any business, a rental requires you to take care of your customers and make sure the property is profitable. This means you (or your property manager) need to keep track of lease expirations and renewals, schedule maintenance and repairs, collect payments, do the accounting, and advertise vacancies, among many others. Failure to do any of these could result in complaints, accidents, and ultimately turnover. Here are two indicators of a poorly-managed rental property:

1. Slow Response to Complaints

While you can't address all tenant requests right away, it's essential to make them feel that you are not ignoring their requests or taking their grievances lightly. Make sure that you hear them out and face them when they ask for you. If this goes on long enough, it could damage the landlord-tenant relationship. Worse, they might resent you and leave as soon as the lease expires.

2. Lack of a Formal System

Good renters usually want everything to be clear and spelled out in writing before they move in. They want to know the rules and regulations they must follow (see the lease agreement clauses you should include), the people they should talk to about maintenance requests, and where they can access information about their tenancy status. Having a formal system in place gives them a feeling of security since they don't have to worry about possible payment oversights, insurance problems, or even sudden termination notices.

What you can do: The solution here is straightforward – improve your property management practices. Make sure you respond quickly to tenant requests (even if you can’t fix something immediately, communicate and let them know you’re on it). Have clear, written policies and provide each tenant with a handbook or a lease agreement that spells out all the rules and procedures (from how to request a repair to how early they should give notice if moving out). 

If you’re too busy to handle everything, consider hiring a reputable property manager or using software tools (more on this next) to stay organized. The better you take care of your tenants and property, the more likely your tenants will take care of you by renewing their leases.

Using Property Management Software to Reduce Turnover

Providing top-notch management is easier said than done – especially as your rental portfolio grows. Even experienced landlords can struggle to juggle all the moving parts: tracking lease end dates, scheduling preventative maintenance, handling rent payments, marketing vacancies, keeping financial records, and so on. Mistakes or delays in any of these areas can contribute to the turnover factors we discussed. 

So, how can you streamline your operations and ensure nothing falls through the cracks?

One of the best strategies is to leverage a property management software (PMS) solution. A modern PMS (like DoorLoop, for example) acts as an all-in-one platform to run your rental business. It consolidates information and automates many routine tasks, making your job easier and your service to tenants better. Here are some key ways a rental property management software can help you keep tenants happy (and encourage them to renew):

In a Nutshell

Reducing tenant turnover is one of the smartest ways to increase your rental profits. Why? Because turnover is expensive and disruptive: you lose rent while the unit is vacant and spend money and time finding a new tenant.

The good news is that many causes of turnover are within your control. By addressing common issues – selecting good tenants, being responsive to maintenance and complaints, keeping the lines of communication open, and using tools (like a robust property management software) to stay organized – you can create an environment where tenants want to stay. 

Some turnover will always happen, but if you follow the strategies above, you’ll be well on your way to keeping great tenants longer and minimizing those costly vacancies.