When you own rental property, turnover is inevitable. As the blog title (made famous by The Clash) suggests, most tenants are faced with this decision on a yearly basis. With bad tenants, turnover can be a good thing; it allows for the opportunity to fill a vacancy with a better tenant. However, even good tenants will likely choose to leave at some point. Vacancy, by both good or bad tenants, has a cost. There are costs in making necessary repairs, vacancy loss, marketing, screening new prospective tenants, and of course, the cost of the owner’s time spent on these things during that vacancy. In this first part of a two-part blog, we will look at the main reasons tenants choose to leave. Part two will present ways to improve tenant retention.
So what are the main reasons tenants leave? In no particular order:
- Too Expensive – It could be that the tenant has received a rent increase three years in a row, or maybe they feel as if they can not even afford the initial rent increase. Or perhaps market has changed since the day they first signed their lease and it would be cheaper to live elsewhere. Whatever the reason, a common reason for a tenant giving notice to vacate is that it's just too expensive.
- Buying a House – The potential problem here is a tenant having to terminate the lease early due to closing on their new home. On the flip side, they may need to extend their lease a few months longer on month to month terms.
- Maintenance Problems – This is another common reason owners can lose tenants, and is fairly easy to “fix,” (pun intended). The problem here could be sub-par workmanship, slow response time (or even no response) by an owner to correct maintenance issues, poor communication, or even a non-trustworthy maintenance technician. These could all lead to an early exit by a tenant.
- Downsizing/Upsizing – Family sizes change: parents my become empty nesters, young families may outgrow their current home upon the birth of children, or some families are forced to move older, dependent family members in. As family size changes, so might their spacial and financial needs.
- Employment/Relocation – Often times when opportunity knocks, people answer. Relocation for a new job is another factor that might cause a tenant to leave prematurely. But people relocate for all kinds of reasons: jobs, marriage/divorce, to be closer to family/to get away from family, schools, etc.
Yes, there are other reasons, a bit more nuanced perhaps, but this captures the majority of notices to vacate. Some of these decisions are unavoidable, others can be nipped in the bud with a little proactiveness on the part of the owner, as well as with open communication. Not only is it important to talk to your tenant about their decision to vacate, it is also important to make sure that your lease contains a detailed renewal clause, as well as an early termination clause so that the owner and tenant are on the same page when either situation arises. As we discuss in the next blog, if the tenant is worth keeping, but is on the fence about staying, there may be ways to help you succeed in keeping them.