One of a landlord’s worst of fears, what happens when your tenant inevitably leaves? If you’re a new investor, the prospect of a vacant property can bring a twinge of fear. It’s scary to think that your rental income will be disrupted for a period of time. Nothing is more surprising than when your renters decide to up and leave one day without telling you, breaking the contract, and then leaving you to seek a new tenant soon as possible. It is okay, because there are some steps you can take to prevent this from happening or picking up the pieces right away in case this ever does happen to you.
But remember, if you’re doing this the right way, you’ve already accounted for vacancies in your ROI formula. Your formula should be very conservative, set aside 40% of your rental income for vacancies, repairs, and expenses. This amount accounts for potential vacancies of up to three months per year, which rarely happens. A typical tenant turnover lasts about three to four weeks.
Because of property management, a tenant turnover is fast and simple! Here’s how a tenant turnover can work: first the property manager will send an email notifying the landlord that the tenant is vacating the property. Then, the property manager will confirm that we’d like to continue renting out the home. The property manager will then thoroughly assess the condition of the property, and provide the landlord with a report. The report that be an exclusive list of items to be repaired or addressed at the rental property. This could mean anything from putting in new window screen, to fixing the walls, cleaning out the oven ( since they most likely didn’t) to cleaning all the left over mildew and remained in the fridge. If the list is long, it means your property manager is doing their job in ensuring the property will be clean and functional for the next tenant.
Tenants are typically required to give landlords proper notice that they will vacate a rental property, especially if the lease is ending and they do not plan to renew. If the tenant is on a month-to-month lease, the notice still must include 30 days to vacate. The landlord should ensure that they keep a written notice from the tenant in her files. In some cases, the landlord may send a written notice to terminate a lease, and that also should be kept in the tenant’s file. Next, the tenant removes his belongings from the apartment, the landlord can schedule a move-out inspection. This is a chance for both parties to walk through the rental property and discuss damages, repairs and cleaning. The landlord must provide a good faith estimate on the cost of repairs for damage caused by the tenant or his guests. Before final move-out, the tenant may offer to repair any damage and clean up, which minimizes the deductions taken from the security deposit. Next, the tenant must make arrangements to turn over the keys to the rental unit, and other access items such as garage door openers or security cards. Once this happens, the landlord can reasonably secure the property by changing locks, re-coding security systems and so forth. Once the tenant vacates the property, the landlord should also do a secondary inspection to evaluate the property’s condition, note any damages previously unnoticed and ensure that all the tenant’s belongings have been removed. The landlord must mail the tenant’s security deposit or an itemized list of repairs within 21 days of the tenant turning in keys. If the tenant left the rental property clean and undamaged, the landlord must return the full security deposit amount.
Worse case scenario, the previous tenants leave unexpected and there’s a huge mess and a massive amount of clutter behind. There are cases involving urine stains left in the carpet, mold growing, piles of trash that lead in bugs, most of the time this is such a surprise because the tenants over the whole time living in your rental property never called to have something fixed so you never know what is going on inside. First off if you are a landlord and you need to do a yearly spraying, check pipes etc. you need to make it in the contract that you will give notice when that happens. If a tenant automatically shuts you down from coming in when going over that contract, that person is out of the question. A good tenant should want their landlord to to yearly checkups to see if everything is up to par. This also gives the landlord an excuse to take a peak inside and see how the tenants are treating their property. If the landlord finds reasonable evidence that the tenant abandoned the property, they can record the facts in writing, change the locks and otherwise secure the property. They also may file a complaint in court against the previous tenant to recover money owed from unpaid rent and damages.
All in all, a tenant turnover is simply part of the business. It’s nothing to be worried about. If you’ve got a great property management team on your side, the process should be quick and painless. Make sure you take proper steps of action just in case a worse scenario were to happen like abandonment. Overall, stay calm- this process happens more often than you think!