How Does Property Size Impact Renter Turnover?
The smaller the multifamily property, the larger the increase in the vacancy rate when a current tenant opts to leave rather than renew. Thankfully, owners are not completely at the mercy of the market.
Losing a tenant often presents a significant challenge for owners of small apartment buildings. Our research finds that turnover rates are higher in small properties than larger properties. Tenants’ renewal decisions are influenced by a wide range of factors, many of which are within the control of landlords.
Our research, however, shows that small (5 to 49 unit) rental buildings have relatively shorter average tenure lengths and higher turnover rates compared to larger buildings. One factor that could be contributing to this trend is the fact that smaller properties are not always run by a professional property management firm. The fact that larger properties contain more amenities could be another factor at play.
While improvements may boost retention, owners of small properties have a more challenging task than owners of large properties. Given their lower rent levels, small asset operators are more sensitive to the balance between investments for upgrades and the future income earning potential of their property.
As shown below, about 34 percent of all households living in small buildings in 2014 reported having moved into their current unit within the previous 12 months, while another 13 percent reported to have lived in their unit between one and two years. Though large buildings had a similar share of households reporting current tenure in the second year, new lessees in their first year were lower at only 29 percent.
In line with greater building amenities, large building households were skewed more toward medium- and long-term tenure lengths. Nearly 30 percent of all households in large buildings reported to have lived in their current residence for between 5 and 29 years, compared to only 23 percent in small buildings.
There are a few tactics you can but in place to improve renter tenure, regardless of property size. A clean and safe property, timely response to maintenance requests and competitive rents are always welcomed by tenants. Amenitizing a apartment property with common spaces like a rooftop garden or outdoor grilling stations is another relatively affordable option.
If you are currently looking for a great property manager to run day to day operations, be sure to check out our post “Finding Peak Performance Through Property Management,” which examines 14 Questions to ask when screening a management firm.