We’ve gotten a lot of questions from clients about the cost to turn a property- the so called “Get Ready” costs. Basically, when a tenant moves out and a property goes vacant, how much does it cost to “get the property ready” for the next tenant?
Typically after 1 year, the cost is about $1,000 to $1,200. The cost could be as much as $2,000 if we had to repaint the entire house (and we could go after the tenant for damages if that is the case). Because we do not use carpet in high traffic areas, we have reduced the get ready costs substantially. If the owner had to replace the carpet in high traffic areas, then $2,000 would be a reasonable estimate to budget, because investor grade carpet (no matter what anyone says) is not as durable and typically needs to replaced every 2 tenant turns (sometimes 1 tenant turn if the tenant is hard on the carpet or stains it).
We have seen rent ready’s go as low as $500 after 1 year of occupancy (we actually had 2 rent ready’s of $500 or less in December, 2014). The longer the tenant stays, the more the rehab is going to cost. If the tenant stays at least 2 years, the probability of the owner having to repaint the house is ~50/50; if the tenant stays longer than 2 years, the probability of having to repaint goes up. For our company, the typical labor on a simple get ready is $500 – $900, and the rest of the get ready cost is materials.
We do offer a program to reduce your rent ready costs by ordering bi-annual property inspections. This allows us to enter the home and make sure the tenant is taking care of the inside. This year we are really focusing on holding tenants accountable for the condition of the house upon move out. Because we operate in higher rent areas, typically the tenants have better jobs, to which if need be, we can go after them and garnish their wages. The process is not quick, but we have been successful on wage garnishment. A lot of the tenants in the areas where we operate have better credit scores (they are aware of this), which motivates them to take extra care of the house during their tenure and return the house in the same condition it was in when they initially moved in, to avoid the possibility of us placing a judgment on them, thus lowering their credit score.
We do several things on the front end to reduce your turn cost and long term maintenance cost. We consistently have a vacancy rate of 3.5% or below. Out of 350 properties we manage, we have 1 move out for February and thus far only 1 on the books for March, which happen to be after a $35 rent increase was passed (different blog for a different day). We believe this is directly related to our business model of providing premium rental homes with nice upgrades that gives our tenants a place they are proud to call home. It is not usual for us to hear when our tenants move in, “your house was the nicest out of all the ones we looked at.”
Rent ready cost can certainly get out of control, but our efforts to provide upgrades in our properties to reduce that cost, thorough tenant screening, property inspections, setting the expectation up front with the tenant and providing a property a tenant is proud to call home are all important in reducing your turn cost.
Hope this gives you a better idea.
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