When it comes to happy tenants, are you doing everything you can to keeping them happy? Do you care if you have happy tenants? Do you believe the title of this post – that tenants being happy equates to a profitable rental?
If you don’t agree with me, that’s OK. But do me a favor and read through this post (and some of my future posts as well). Challenge me on whether my logic is sound. I’ll use numbers and the value of time as an argument for keeping your tenants happy. Because doing so means you will have a more profitable rental.
Follow-up on Catholic Charities of Madison County
In my last post, I talked about how organizations like Madison County Catholic Charities can help your tenants out when they are struggling. It fits right in with this post. Helping your tenants through a tough spot may mean they can afford their rent.
On Saturday April 11th, they will be holding their annual dinner in Alton, IL at the Holiday Inn. You can also purchase raffle tickets to potentially win $10,000. Tickets are $30/person and include dinner, beer, wine, soda, and dancing. They limit out at 300 attendees so don’t wait to buy your tickets! Send me an e-mail and I’ll get you in touch with a representative or call Catholic Charities at 618-798-4287.
Tenant Loss is Money Lost
Let’s first start by saying that I am talking about decent tenants in this post. Not the kind who always has excuses, always wants to pay late, or is behind on their rent. These troublesome tenants cost you time and money. I’m describing a good tenant.
A good tenant is one who makes their payments on-time. Someone you don’t have to track down every month for their rent. Someone who changes their own light bulbs (you shouldn’t be changing those, by the way). These tenants aren’t having their boyfriend stay over for weeks at a time. You’re not worried about them setting up grow lamps in the bathrooms. That’s the kind of good people I’m discussing here.
So are you taking care of these folks? And what are you doing to find more of them?
Let’s put some numbers behind this thing to make sense of it all…
Fixed Costs (mortgage, insurance, property taxes, management…): $600/month
Typical Turnover Costs: $450
Typical Turnover Time: One Month
So you are making $150/month off your property while it’s rented. You lose a great tenant and have turnover the property for the next person. That’s going to take about 10 hours of your time at a very conservative $15/hour.
- $750 in lost income
- $600 in expenses
- $450 in turnover costs
- $150 in your time.
$1950/$150 profit… It’s going to take you over 13 months to “break even” on losing that tenant.
If you are like me, you’ve been putting aside 8% or more of monthly rent to account for the vacancy. So you would have $1,440 saved in the vacancy fund. But you’re still out of pocket $510. That means you’ll be giving up nearly 3 ½ months of profit by losing this good tenant.
I think my math is solid. Even if you do everything right, losing a good tenant is going to end up costing you profits on your rentals. In future posts, I’ll be describing some techniques you can use to keep your good tenants renting from you for years to come – allowing you to keep more of your profit!
Do you agree with my assessment? Think I’m full of horse’s patootie? Then please leave me a comment below! Look forward to hearing from you!
To Your Investing Success,